Hopefully, the full impact of budgetary announcements, especially with respect to increased expenditure on infrastructure in rural and urban sectors, would be felt from Q1 FY18.
Release of economic data by the government is probably being overshadowed by the recent political developments. It largely reiterates our belief that irrespective of what is happening to the economic parameters of the country, the emerging political leadership is capable of providing a new dimension to the economic growth of the country.
The official release of GDP growth in the third quarter of FY17 has indicated much lower impact on growth indicators on account of withdrawal of legal currencies than what was popularly envisaged. It is gratifying to note that after a gap of many months, agriculture production has risen 4.1% in the first 9 months of the current fiscal year against a mere 0.4% growth in the last year.
Thus, although industrial and service sectors have gone up 5.9% and 8.1% respectively, during the period – much lower than 8.1 % and 9.8% rise in last year in these sectors – the resultant GDP growth has clocked only 0.5% lower from 7.7% growth in the first 9 months of the last year to 7.2% in the current year.
IIP data need a little more elaboration. Even at the cost of repetition, the implications of differential growth pattern in industrial segments may be looked into for better understanding of the commodity sector.
And since industry forms an essential component of total GDP, the relevant indices point to a changed scenario. In January’17, IIP rose 2.7%, driven by a 2.3% rise in manufacturing index, a 5.3% growth in mining and 3.9% push up in electricity generation. Some of the steel intensive sub-segments under manufacturing did not share the optimism observed in other categories. For instance, fabricated metals had fallen by 4%, machinery and equipments dropped 0.3%, other transport by as high as 13.4 % and furniture came down by 10.5% during the month.
The manufacturing growth was, however, sustained by 42.4% rise in electrical machinery and apparatus and 8.3% rise in motor vehicles and trailers. This has been reflected in 2.8%growth in apparent consumption of CRNO/CRGO sheets in April-January’17 compared to last year’s level. The consumption of CR coils and sheets and HR coils and sheets were subdued (2.3 and -1.2%) due to variance in growth in the consuming segments.
Much to the relief of steel industry, the capital goods sector experienced a growth of 10.7% during the month, followed by a mere 2.9%rise by consumer durable segment. Accordingly, the consumption of plates went up 4.7% with relatively lower growth in CR consumption.
Thanks to timely and pro-active measures undertaken by the ministries of steel, commerce and finance, the Indian steel industry was saved from the injurious impact of dumped, unfair and predatory-priced imports from China, Japan, South Korea and CIS countries in almost all steel categories.
As a support to these policy measures, the imports of HR during the April-January’17 period have gone down 45.4%, the indigenous availability has gone up by 20.2%. In case of CR, the imports have gone down 50.3%, the availability from indigenous sources has gone up 40.9%. Plate imports have fallen 29.5% with indigenous availability going up 10.8% while electrical sheets were imported 8.7% lower during the period with 50.9% growth in domestic availability.
Also the imports of TMT and wire rods have dropped 34.3% with a corresponding rise in domestic availability from all sources of 4.6%. This trend provides a much needed relief for the domestic players for the rise in availability of finished steel by 11.1%during the first 10 months against the growth in apparent consumption by 3.4%.
Hopefully, the full impact of the budgetary announcements, especially with respect to increased expenditure on infrastructure in rural and urban sectors, would be felt from Q1 of FY18 and the thumping majority of the government in the recent election is most likely to prod them to focus on the developmental projects as the sole means of poverty alleviation.
The author is DG, Institute of Steel Growth and Development. Views expressed are personal.