The steel companies nevertheless, have reported increase in stocks and some price drops have been noticed in the market place. Quite understandably, stocks are accumulating because steel production has shot over consumption. This has, again quite predictably, also in view of the crash of flat products prices in the global market, brought in some pressure on the domestic prices.

It is the slowdown in the manufacturing sector that is causing more headaches to the industry and the Government. Although the figures published by the industry and the Government do not dispute the drop in growth rate in manufacturing, there is no clear reason to believe that the slowdown is going to be a protracted one. The reported figures are also related to the second quarter at the latest. There seems to have been some change in scenario since then, although firm reports are still awaited.

One important piece of information is the sharp rise in exports, by as much as nearly 21 per cent valued in the US dollar, during April- November 2000 over those on the corresponding period in the previous year. Much of this increase has been accounted for by the manufacturing sector.

This phenomenal rise in exports, can be a indication of the shape of things to come in the coming days with exports leading growth in the economy and in the manufacturing sector. The same can also be read as a sign of poor state of the domestic market forcing the industry to export as much as they can taking also the advantages of the weakening rupee during the period. While both are well placed arguments, there is greater possibility of seeing firm exports than forced exports.

What has worried most of the economists is the drop in the rate of growth of the farm sector. This, most have assumed is the chief cause of the reported drop in domestic demand. They have also argued that this factor will play a larger role in shaping the pattern of demand in the economy in the coming days. The sharp drop in investment in the new economy has also been seen as responsible for this slowdown, or absolute drop in final consumption demand in the economy.

Of the two, the first may not have any perceptible impact on steel demand immediately. The second, the slowdown in investment in the new economy, will also not have substantial impact on the steel demand, for the same reason for which steel demand remained unaffected during the IT super-boom. Steel is more sensitive to investments in constructions - industrial, infrastructure related and commercial housing. Nor much of the same was added to the economy due to the IT revolution.

There is talk of the global economic growth rate slowing down this year, which may have an adverse implication on India's exports. But, considering its composition at the moment, exports are unlikely to suffer in any major way on account of this. In fact, the country's exports are getting diversified, more organised and acceptable. Therefore, exports, by all probability, will help the country's industrial sector to hold on despite a temporary drop in domestic demand.

The old economy cannot be written off. After the dotcom bubble has burst, there is renewed interest in the old economy enterprises. If the pace in export growth is maintained, the manufacturing sector will not only sail through, but also, over a period of time, come to a position to attract investor interest, albeit on selective industries. The promised and the planned infrastructure development, if it takes off even on a smaller scale, to begin with, will help steel demand gain strength.

Steel consumption depends fundamentally on the level of investment. With only about 30 per cent of the steel going into the manufacturing sector for end use application and with no strong correlation between industrial production and steel demand, the steel makers need not panic unnecessarily at the reported slowdown in manufacturing sector growth.

This, however, does not provide much comfort to the Indian steel makers. How long will it take before the Indian market grows to match the domestic supply, especially for flat products ? One can not hope for this balance to come about in 2001. Unfortunately, and rather against the expectations of most experts, demand for flat products in India has not grown at the pace projected. The reasons for this are fairly well known.

What happened in the past and why the same happened is a different matter. The point to note is that the country's flatproducts consumption is growing only slowly. It will take about three years, for the country's demand for these products to come to the level of the industry's current capacity.

(The author is associated with Steel exporters' Forum. The views expressed here are his own)