India’s manufacturing growth will test steel industry’s mettle

Apr 16 2014, 03:59 IST
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SummaryAccording to IMF's global economic outlook, the world recovery is gaining strength bolstered by the financial stability...

According to IMF's global economic outlook, the world recovery is gaining strength bolstered by the financial stability of the advanced economies, while the growth process is slow in emerging and developing economies. The downward risks that these economies would encounter, India being the foremost among them, relate to monetary tightening to controlling inflation and inflationary expectations and structural reforms with regard to investment, taxes, subsidies and product pricing. Curiously, the advanced countries have been advised to take measures to avoid deflationary trends that some of them (US, Germany, France, Japan) are facing. India’s growth which plummeted to 4.4% in 2013 has been projected to grow to 5.4% in 2014 and to 6.4% in 2015. For China, it is a soft landing of GDP coming down from 7.7% in 2013 to 7.5% in 2014 and to 7.3% in 2015. The IMF has appreciated India’s efforts to bring down the CAD to 2% of GDP in 2013.

The findings of the report for the Indian economy, therefore, brings into focus the dichotomy between monetary tightening and economic growth, well backed up by investment and a reasonable industrial growth, especially in the manufacturing sector. If the RBI rightly claims that by raising the real interest rate, inflation has been brought down, the responsibility of a sharp drop in GDP from 9.3% in 2010-11 to 4.7% in Q3 in FY14 cannot be left to only policy logjam stalling innumerable projects and inability of all the states to agree on a uniform Goods and Service tax. A large part of the overall uncertainty and lack of confidence among the buyers, entrepreneurs, suppliers and all other business stakeholders had their roots in the secular decline of GDP, which still remains one of the best indicators of the health of the economy. It would be the litmus test for the new government to find out innovative steps and means to put an end to the uncertain business confidence so that the health of the manufacturing sector is retrieved, entrepreneurial zeal for fresh investment is generated thereby leading to the growth in GDP.

The short-range outlook for steel consumption by WSA has projected finished steel consumption in the country to grow by only 3.3 % at 76.2 MT in 2014, which is better than the paltry growth of 1.8% in 2013 and envisaged a 4.5% growth in steel consumption in 2015.Official figures show that India consumed around 73.9 MT

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