This new series supersedes the earlier back series on National Accounts, brought out by Sudipta Mundle Committee.
The Gross domestic product (GDP) growth at 7.1% during the second quarter (Q2) against growth of 8.2% in the previous quarter (Q1) is commented upon as a signal of slowdown. But, it throws up some interesting facts which are rather encouraging to the steel industry.
The gross value added or GVA (at 2011-12 prices) for mining & quarrying has fallen to negative and for manufacturing & construction sector, the value additions have come down to 7.4% (from 13.5% in Q1) and 7.8% (from 8.7% in Q1), respectively.
However, the value addition in electricity, gas, water supply and other utility services has gone up from 7.3% to 9.2% in Q2. What is most reassuring is that gross fixed capital formation (GFCF) as a percentage of GDP (at current prices) has gone up from 28.8% to 29.2% in Q2.
The first half (H1) figures of the current fiscal year are more favourable as compared with H1 during the previous year.
It shows while growth in the GVA of mining sector has dropped down to negative from a positive 3.9% last year, growth in GVA of manufacturing sector at 10.3% in H1 of the current fiscal has significantly exceeded 2.6% growth in the previous year.
In addition to the growth in value addition, the construction sector has reached a respectable 8.3% growth in H1 of the current year against a mere 2.5% growth in H1 last year.
The GFCF has risen to 29% in H1 of the current year, against 28.3% in H1 last year.
Total imports and exports have moved up by a higher rate in the current year, although the rate of growth in imports exceeds that of exports. Summarising the various components, it is seen that total industry sector has grown 8.6% in H1 of the current year, against 3.1% in the previous year.
This is good news for the steel industry. It has been made possible by a higher rate of investment and marginally higher rate of private final consumption expenditure (PFCE).
Last week, the Central Statistics Office (CSO) has also come out with back series data of the National Accounts from 2004-05, with the base year 2011-12. It would, therefore, be possible to get a time series data for 13 years from 2004-05 to 2017-18. This new series supersedes the earlier back series on National Accounts, brought out by Sudipta Mundle Committee. It is understood that CSO would shortly come out with back series for years prior to 2004-05.
It is interesting to note the trend and behaviour of GFCF and PFCE components of GDP, manufacturing and construction sectors, and relate with growth in steel consumption.
While the trend and correlation analysis provides statistically robust results, based on long-time series data, it would not be out of place to mention annual growth rate in a particular year in the above elements would get reflected in steel consumption data in that year or with a lagged effect.
The peak years of GFCF as percentage of GDP were 2007-08 (35.8%), 2008-09 (34.7%), 2011-12 (34.3%). Steel consumption which grew by 11.4% in 2007-08, fell down to 0.4% in 2008-09 and rose to 6.9% in 2011-12.
Manufacturing value added (at constant prices) has clocked peak growth rates in 2006-07 (17.8%), 2009-10 (11.0%), 2015-16 (12.8%) and 2016-17 (7.9%). It is also noteworthy to mention that machinery and equipments, a major component in manufacturing, grew significantly in 2005-06, 2006-07, 2008-09, 2009-10, 2014-15 and 2015-16.
The corresponding growth rates in steel consumption during 2006-07 was 12.9%, followed by 13.4% growth during 2009-10 that dropped to 4.9% in 2015-16 and 3.1% in the following year. The construction sector value addition (at constant prices) had observed peak growth rates in 2005-06 (12.9%), 2007-08 (11.7%), 2009-10 (6.8%), 2011-12 (13.1%) and 2017-18 (5.7%).
It could impact steel consumption to reach 13.9% growth in 2005-06, 11.4% in 2007-08, 13.4% in 2009-10, 6.9% in 2011-12 and 7.9% in the last year. Value addition in electricity, gas, water supply and other utility services (at constant prices) could clock good growth in 2006-07 (8.0%), 2007-08 (8.4%), 2011-12 (8.6%), 2016-17 (9.2%) and 2017-18 (7.2%). The result got reflected in 12.9% growth in steel consumption in 2006-07, 11.4% in 2007-08, 6.9% in 2011-12, 3.1% in 2016-17 and 7.9% in last year.
A positive relationship between steel consumption and the above components and sectors, such as GFCF, manufacturing, construction, electricity, oil and gas exists. More steel activity in these segments would only enhance the rate of growth in the demand for steel.
(Views expressed are personal)