The announcement of few economic measures relating to FDI and petro-linked user charges in the past week had brightened market sentiments and raised the general expectations for more of such boosting doses.
The big question mark is on the broad political consensus on the issues. It is strongly felt that even if the benchmark figures are ultimately brought down, the messages by themselves would benefit the economic climate.
The IMF projection of 4.9% GDP growth, ADB?s forecast of 5.6% and the threats from Morgan Stanley to downgrade investment credit worthiness when compared with the 6.7% prediction for the economy by the Economic Advisory Council to PM give an impression that globally India is viewed as a country with a slower growth potential than warranted.
A few years back the projections by the IMF year after year on China?s economic growth were much lower than actually achieved by China and this may be one of the reasons why international agencies are now much conservative in predictions on developing economies.
A prediction of doom may also put pressure on the country concerned to further opening up of the economy and facilitate the entry of multinationals who are suffering under the dual pressures of lower margin and excess capacity.
There is a very pressing need to articulate measures suiting the long-term interests of the country and industry needs to be assured of the full support of a policy which alone could fully realise their endeavours of expansion, modernisation and customer service.
The World Steel Association, in their latest forecast, has brought down the growth rate of global steel consumption in 2012 to 2.1% against 6.2% achieved in the previous year. There is a change in their perception on China that is currently being seen to have an engineered soft landing with both manufacturing and construction slowing down and depressed real estate market against the crash landing predicted in April.
As a result, Chinese steel consumption is to grow by 2.5% in the current year. For India, the annual growth has been projected as 5.5% for 2012, which tallies with the growth in steel consumption in the country in the first five months.
The world body is very optimistic on the US steel consumption growth.
Although it has been acknowledged that the US recovery momentum has been restrained by fiscal uncertainty, the consumption has been predicted to rise by a healthy 8.3%.
It may be mentioned that this respectable growth would come in the aftermath of more than 11.5% growth gained by the US in steel consumption in 2011.
It has been stated that auto sector growth would be the prime driver supported by infrastructure growth.
US economy is to grow by 2.2% in 2012, says IMF. It appears one of the major contributors to economic growth in the US in the current year would be the steel industry. Indian steel industry has a similar, if not more, potential to contribute to the country?s growth and help the government to formulate appropriate policy enablers.
This way, a lower projection puts a challenge before the industry to unleash its hidden strength.
The author is DG, Institute of Steel Growth and Development. The views expressed are personal