Steel consumption mirrors economy

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Sushim Banerjee: Dec 18 2012, 03:07 IST

The GDP figures for Q2 hardly took anyone by surprise as the July-September period was dominated by political events overshadowing the economy and a few measures that were announced with regards to FDI and reducing subsidies were to be discussed in Parliament and to become effective afterwards. The movement of one or two indicators in H1 has the potential of boosting the economic health of the country by giving a fillip to demand, which justifies the capacity augmentation that is being planned. Mining and quarrying have grown by nearly 1% against a 3% drop in HI of the previous year. The construction sector has grown by nearly 1.8 times compared with last year, which is reassuring. Financing, insurance and real estate sectors have grown by more than 10% in the current fiscal.

Taken together, the trend implies that the spurt in domestic savings has found outlets in real estate purchase and although infrastructure construction has not shown much activity, construction of residential and commercial complexes has seen an uptrend. Investment indicated by gross fixed capital formation as a percentage of GDP at market prices remains almost steady at 33.3%, but the rate of growth of investment has sharply come down from 9.7% to 2.3% in the current fiscal. The key concerns are the much slower growth of GDP in manufacturing (0.5%) and much less progress in electricity, gas and water supply (4.8% against 8.9%). Slow growth in two of these steel-intensive segments has adversely affected steel consumption, which has shown 4.2%

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