Indian firms face mounting pressure from Chinese undercutting, regulatory tightening, and the need to shift from cost advantage to innovation-led exports

As demand begins to recover after a sharp downturn in FY24, Indian firms are facing new challenges: aggressive undercutting by Chinese suppliers re-entering the global market and increased regulatory scrutiny across the US, EU, and Japan. Even as the China+1 strategy continues to favour India, a complex mix of price volatility, compliance hurdles and fragmented domestic readiness threatens to stall the momentum.

Exports Falter In FY24 Despite Structural Tailwinds
According to a recent Rubix Data Sciences report, India’s agrochemical exports declined by nearly 22 per cent in FY24 due to destocking cycles, pricing pressure, and heightened competition from Chinese players. Distributors in key markets like Brazil and the US pulled back orders amid excess inventories and falling margins, even as Chinese firms returned with low-cost offers after resolving local environmental curbs.

“Distributors worldwide reduced procurement to manage excess stock amid falling prices, while Chinese suppliers re-entered the market with aggressively priced products, making Indian exports less competitive,” said Bhavik Joshi, Business Head at INVasset.

But experts believe that despite near-term volatility, the long-term demand outlook remains strong. Latin America, particularly Brazil and Argentina, along with the US and Japan, continue to source high volumes of Indian insecticides, fungicides and herbicides. But these gains are tied increasingly to compliance with maximum residue limits (MRLs), product traceability, and sustainable manufacturing standards.

“Japan is emerging as one of the largest importers of Indian herbicides, a sign of increasing trust in Indian quality and compliance,” said Nishant Kanodia, Chairman and Promoter of Matix Fertilisers and Chemicals Ltd.

Experts also shared insights on how Indian companies are aligning by enhancing their global competitiveness, investing in local (target market) R&D centres, establishing formulation units closer to key markets, fast-tracking registrations, and deepening partnerships with local distributors. The focus is on market-specific product portfolios, sustainability and tech-enabled delivery mechanisms.

Policy Support Offers A Cushion
On the policy front, experts say that initiatives like Make in India, dedicated chemical parks in Dahej and Vizag, and fast-tracked registration processes are helping Indian firms compete. The RoDTEP export incentive scheme and GST rationalisation have also marginally improved cost structures.

“The schemes drive local manufacturing, reduce dependence on imports, and encourage investment in infrastructure and technology. Chemical parks offer integrated facilities, better logistics, and common utilities, all resulting in lower production costs while conforming to the environment,” said M.K. Dhanuka, Chairman, Dhanuka Agritech.

Industry experts say that agrochem must be included within the production-linked incentive scheme (PLI). While agrochemicals are currently outside the PLI ambit, stakeholders are actively engaging with the government to seek inclusion, especially to bolster innovation and high-value molecule development.

From Cost Advantage To Innovation Edge: Still A Work In Progress
As the world’s fourth largest producer of agrochemicals, India’s emergence as a leading agrochemical exporter is largely built on stronger backwards integration, better cost efficiency and quality control, and process chemistry. But leaders opine that a transition to R&D-led innovation is essential if India wants to build long-term export resilience.

“We are still spending just 2-3 per cent of revenues on R&D,” Joshi said. “That’s far below what global peers invest. If we want to lead, not follow, we need stronger IP pipelines and academic collaboration.”

Experts caution that while top firms are adopting zero-liquid discharge (ZLD) practices and scaling up bio-based formulations, many mid-sized exporters lag in compliance and traceability. Regulatory clearances – both domestic and international – remain time-consuming and expensive, creating a gap between ambition and execution.

They added that weaknesses lie in the shape of prolonged regulatory clearance procedures, poor capital investment in cutting-edge research, and the absence of industry-academia partnerships. Overcoming these areas of weakness will be critical to driving innovation.

India may be winning new markets today, but sustaining that lead will require more than geopolitical tailwinds. As China returns to the global agrochemical game and importing nations impose stricter standards, Indian exporters must invest in R&D, scale responsibly, and lead on compliance—or risk ceding the very ground they’ve worked so hard to gain.