The steel industry is one of India’s core industries, contributing to slightly more than 2% of GDP. The Indian steel sector outlook, on the back of strong
domestic demand from government and private sectors, is likely to remain firm
amid concern of global demand uncertainties in the current fiscal.
Strong Demand Projection
in India
The demand projection for the sector is looking
strong as the Central Government focuses on strengthening the domestic
manufacturing base under the Aatmanirbhar Bharat program presents a strong opportunity for
steel production and consumption in India.
The production linked incentive scheme, which
intends to incentivise the additional steel production in India, is expected to
boost special steel demand in Automobile & Auto components, consumer
durables, solar equipment, telecom, etc. Opportunities in different-different
Sector like Automotive, Capital Goods, Infrastructure, Airport, Railways, Power
etc. Moreover, over the long term, the National Steel Policy envisions more
than doubling of India’s per capita steel consumption to 160 kg in the next 10
years from the current 77 kg.
It is expected that global demand and prices will remain strong as China will
no longer be adding 50-60 million tonnes to its capacity annually and that
country may not export significantly higher quantities to disrupt steel prices
globally.
However, India Ratings and Research (Ind-Ra) has
maintained a “neutral outlook” on the steel sector for FY23 in view of high raw
material inflation that would result in elevated prices and moderation of
volume and margin. With huge availability of minerals in the country, metal
sector is expected to play a major role in the country’s ambitious plans of
self-reliant India and USD 5 trillion economy by 2024-25.
Further, the ongoing retrenchment of China’s real
estate sector and slower than expected recovery of private consumption and the
ongoing tension between Russia and Ukraine have limited the growth prospect.
The world is paying a heavy price for Russia’s war in Ukraine. It is a
humanitarian disaster, killing thousands and forcing millions from their homes.
The war has also triggered a cost-of-living
crisis, affecting people worldwide. When coupled with China’s zero-COVID
policy, the war has set the global economy on a course of slower growth and
rising inflation. Growth is set to be markedly weaker than expected in almost
all economies.
Strong Budget for the Steel sector can lead
to greater push for Indian Steel sector
We hope for an increased allocation for products
from the steel sector to be covered under the PLI Scheme giving the industry a much-needed
boost. We also hope there is an increased focus by the govt. to scale up the
infrastructure sector in the country which will have a positive domino effect
for the steel sector. A good budget for National Highways will also translate
into a positive for us which will further propel the growth of the sector.
The industry is already reeling under a lot of
pressure due to the raw material price hike, measures stated above will only
help the industry look forward to a healthy growth trajectory for both the
industry and the economy.
The important positive factor for India is its
large and fast-growing middle class, which is helping to drive consumer
spending and the country’s consumption expenditure is expected to double from
$1.5 trillion in 2020 to $3 trillion by 2030. The government’s
production-linked incentive (PLI) scheme is expected to provide a thrust to the
manufacturing sector in FY2022 and FY2023.
The domestic steel industry, which grew between 5%
to 7% on a year-on-year basis, is expected to play a bigger role in enabling
India to achieve the 5 trillion economy target by 2025. We anticipate that the
recent government policy announcements about railways, roads, civil aviation,
gas pipelines for affordable housing, and increased budgetary allocation to
this sector would support a relatively solid demand recovery and drive the need
for iron & steel products.
So it is pivotal that we have a good budget that
will ultimately help us pip China in the Steel production and consumption race.
We remain confident that the Govt. will take the necessary measures to help us
achieve that with the Union Budget being a key component in achieving the
objective.