Steel industry can steer India towards $5 tn economy by 2025: EY-CII report

Steel industry can play an integral role in steering India towards a $5 trillion economy by 2025, as per the EY-CII report titled ‘Steering India into a US$5 trillion economy with Steel’. “The India steel sector has been vibrant and has been growing at a CAGR of about 5 percent-6 percent y-o-y. With a V-shaped demand recovery post-COVID, policy announcements made by the government across sectors, including rail, road, aviation, gas pipeline, and housing and changes in global supply demand equations, the industry has made record production and growth,” the report read.
 
Growth of crude steel production in India has not kept pace with the growth in capacity of production, according to the report. As per this report, steel sector contributes ~2 per cent to India’s GDP and employs half a million people directly and 2 million people indirectly.
 
This report illustrates as of FY21, India is the world’s second largest steel producer with ~102.5 MT production and an installed capacity of 142.2 MT. On the consumption front, India is the third largest steel consumer in the world and has a finished steel consumption of 94.9 MT in FY21.
 
Sectors that have emerged as leaders in using finished steel are  -- construction (62 percent);  capital goods (15 percent); automotive (9 percent); intermediate products (6 percent); consumer durables (5 percent); and railways (3 percent) as of July 2021.

In recent years, India has become a net exporter of steel as India’s steel imports have been much lower than imports since FY11. Domestic production of specialty steel was able to meet 85 percent of India’s demand in FY21, with the balance met through imports. Significant portion of steel import was of specialty steel comprising high grade alloy steel and specialty steel.  Even though India is the second largest steel producer worldwide, specialty steel accounts for only 18 percent share of exports in FY21.
 
As of 2020, the usage of finished steel stood at 1,772 MT globally and China (56.2 percent), India (5 percent), Japan (3 percent) and other Asian countries (9.1 percent) were key consumers with a combined share of around 64 percent.

REASONS BEHIND GROWTH IN STEEL EXPORTS
 
The growth in steel exports is also aided by lower domestic demand and the foreign trade agreements that India has with countries like Japan and South Korea. While countries like Japan and South Korea export value-added steel products to India compared to India which exports hot rolled coils (HRCs) to these countries, markets like EU and USA have protectionist policies like quota restrictions and Middle East is also considering the same.
 
The Union Government has also formulated policies aimed at bolstering the domestic steel sector and some of these policies are National Steel Policy, 2017; Steel scrap policy; Domestically Manufactured Iron and Steel Products (DMI&SP) policy in government procurement.
 
The government has also rolled out Production Linked Incentive (PLI) scheme for specialty steel to ensure raw material security for steel sector particularly focused on iron ore and coal. The PLI scheme also aims to provide support to MSMEs of EEPC for exports promotion, thus, enhancing the scope of Quality Control orders on steel and setting up of an Empowered Group of Secretaries (EGoS) and Project Development Cells (PDCs) in Ministries/Departments for attracting investments and to streamline investment inflows.
 
HERE'S HOW STEEL SECTOR CAN STEER INDIA INTO $5 TRILLION ECONOMY
 
According to this report, the government needs to take more steps to enhance export orientation and presence in attractive products and markets, strengthen domestic steel industry through policy support, efficient resource utilisation, achieve sustainable operations in steel industry and research and development led production innovation.
 
“The government is providing support to the steel industry for rapid growth through policy formulation and strict governance. Industry players will have to play their part in demonstrating discipline in capital spends and foresights of investing in the right technologies for expansion. The forces of global trade and sustainability would need to work in sync to execute existing strategic plans, update them basis emerging threats and opportunities which are unique and relevant to India, and draw up a collaborative game plan to nuture the future of a robust and sustainable steel industry,” Saurabh Bhatnagar Mining and Metals Consulting Leader at EY India said.

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