Latest reports on Indian economy do not make the readers happy. GDP has been projected to exhibit a growth of 6.9% in the current fiscal, a clear drop of 1.5% from the previous year. Industrial production at 3.6% in the first 9 months is clearly 4.7% lower than the last year.
Some of the other indicators which are of special concern to steel industry are: Gross fixed capital formation as a percentage of GDP at constant prices stands at 31.9% in the current year which is 0.6% lower than last year. Construction sector is growing by 4.8% as opposed to 8% growth in last year, manufacturing sector in the first nine months has grown by 3.9% against 9% growth in the previous year. Other areas related to mining sector is growing at (-) 2.7% (6.9% last year), capital goods at (-) 2.9% (as high as 18% last year), consumer durables at 5.3 % (13.8 % last year).
At a micro level, published data reveals that rate of growth of production of cars in the first 9 months of the current year has seen a growth of only 1.7% than last year and other than commercial vehicles, transformers, auto ancillaries and complete tractors almost all other steel intensive segments like LPG cylinders, drums and barrels, mining equipment, material handling equipment have exhibited lower production growth compared to the previous year.
Only silver lining has been the growth of electricity generation by 9.4%, more than double of last year. These developments along with the movement in the critical economic indicators must get reflected in the production and consumption growth of steel. In the first 10 months, steel production has moved up by around 7 % compared to last year, while finished steel consumption has grown by 4.7 %. Enhanced production has led to around 12% growth in steel exports during the period.
Would the economy behave in a better manner in the next 2 months so that the annual figures show a positive growth? The answer to this question lies in a few positive steps the government can adopt early. First, RBI must come out with a drop of interest rate by 100 basis points in the minimum as monetary policy measures had an adverse impact on investment, both prospecting and ongoing with decline in food prices caused by boost in supply scenario. Second, finance ministry and other economic ministries by their actions and speeches must create an enabling environment which would pave the way for revival of trust and sustained belief among the stakeholders for taking forward the growth positives in the coming months.
Passing of important bills like land acquisition, MM&DR in the budget session of the parliament and government?s endeavor to back the bills with maximum consensus from the industry would go a long way to regain the market sentiments.
The author is DG, Institute of Steel Growth and Development. The views expressed are personal