Many start-ups are showing the implications of innovative technologies in a sporadic manner .
Some reports suggest there is a decoupling between GDP growth and growth of industrial output in India. As an example, GDP grew 8.2% in FY17 and growth of IIP was restricted to 4.6%. In the following year, GDP grew 7.2%, while IIP growth was confined to 4.4%. In FY19, the advanced estimate puts GDP growth at 7% and IIP estimates for the first 11 months of the current year puts the IIP growth at 4%.
It has also been highlighted that the value added concept of measuring GDP may not go hand in hand with growth in output as the increase in value added may be the result of diminishing cost of inputs or rising prices of finished products and may not linked with the rise in production. This applies to the industry segment of GDP, comprising of mining and manufacturing, electricity, gas and water supply, and construction segments.
For all these segments, the presence of SME sector is predominant and therefore the output statistics of a large number of firms may be unreported as these are mostly outside the prescribed threshold of goods and services tax (GST)-compliance and deserve exemption.
Steel is consumed by various industrial segments such as electricity, infrastructure and construction, capital goods, intermediate goods and consumer durables. Thus, steel-weighted index (steel weights of these segments) is a better indicator for assessment of steel demand. It should be noted that the value added by these sectors is reflected in GDP estimates which are also contributed by non-industrial sectors like primary and service sectors.
One of the major segments under IIP that has over the years become an important element influencing the pattern and growth of steel consumption is automobile sector. The whole gamut of production of the finished vehicle, along with a substantial coverage of auto components, has been the driver of steel consumption in the country. This sector growth gave significant boost to capacity expansion in flat products like hot rolled (HR), cold rolled (CR) and coated products.
Despite a drop in growth of the sector to around 8% in FY19 from the previous level of 12-13% in the previous years, the product development in cold rolling in terms of lower dia thickness, higher dia width, surface treatment, extra deep drawing properties and new product development such as dual phase steel, bake-hardening steel, interstitial free steel, has provided Indian steel players an extraordinary opportunity to upgrade their facilities. Cold rolled steel (drawing and forming grade), full hard quality, austenitic and martensitic SS, galvalume and galvannealed, spring steel grade wire rods are being imported to meet the growing demand from auto and auto component sector.
It is expected that indigenous capacity for these grades would be developed to substitute for imports. To serve the demand of auto sector, the joint venture/collaborative approach with foreign technology suppliers, such as Nippon steel and Sumitomo Corporation, JFE Steel, Arcelor Mittal, Daneilli, has taken Indian players to a higher level of technology absorption. The growth in auto sector in India would develop Indian manufacturing capacity as the torch-bearer of quality steel. It has led to the setting up of quality service centres on Indian soil. With the emergence of POSCO and Hyundai as exporter of quality HRC for its customer relationship managements in India, it has opened up new business opportunities.
Two related developments are worth mentioning. The first is the advent of Advanced High Strength Steel (AHSS) for auto sector. The use of AHSS brings down the weight of the vehicle as it has to conform to lower emission norms as per Euro standard. Customers always look for safety parameters and the use of AHSS has much improved safety aspects.
Extensive use of AHSS (like GI TRIP 690 developed by Arcelor Mittal, which has made steel highly formable) in cars, trucks and SUVs has made vehicles lighter and enhanced the safety aspects. The challenge to Indian producers to make available AHSS in the coming years in domestic market would be stiff as more and more car multinationals enhance their Indian facilities. The export potential of cars manufactured in India using AHSS is enormous and it would result in improving the share of engineering exports in the coming years.
The second phenomenon is the emergence of electric vehicles. China has taken a lead in this development and other developed countries are also not lagging due to primarily environment concern for using petroleum products. China has even built roads with automatic charging facilities.
Though speed of the car, safety-related issues, frequent charging issues on longer stretches are a few challenging areas, the face and pattern of the auto sector is going to have a paradigm shift in the near future and India needs to be prepared.
The impact on employment and job losses due to elimination of traditional ways of manufacturing and replacing with innovative processes is a major issue that any developing country like India has to face.
Concurrently, there is an issue of acquiring new skill development of manning the innovative approaches along with redeployment or creation of earning opportunities for the replaced manpower.
Many start-ups are showing the implications of innovative technologies in a sporadic manner . But, the road ahead is of a mammoth task that preparations must start now.
(Views expressed are personal)