Notwithstanding lower growth of domestic steel consumption during the first three quarters of the current fiscal, the Economic Survey has said that the overall performance of the sector is “optimistic’’.
“Despite the softening of industrial demand as reflected in a 4.4 per cent growth in real consumption of total finished steel during April-December, 2011 over the same period of last year, the overall April-December 2011 performance of Indian steel industry is optimistic,” it said.
The Survey pointed out a list of bottlenecks responsible for lower steel consumption, including high inflationary pressure within, deteriorating global economy, multiple hikes in interest rates by the Reserve Bank of India.
“In 2011, it was faced with stiff challenges posed by rising inflationary pressures at home and deteriorating global growth conditions.
The multiple hikes in interest rates by the central bank also impacted the industry’s growth directly and indirectly through their effect on the growth of key user industries,” the Survey said.
The RBI had hiked short-term lending rates 13 times between March 2010 and October 2011.
India’s steel consumption was a little less than 70 million tonnes last fiscal. According to World Steel Association, global steel consumption is estimated to slowdown to 6.5 per cent for 2011 and 5.4 per cent in 2012.
Raw material security, infrastructure, quality of coking coal and uncertainties in land acquisition have emerged as bottlenecks to setting up of new steel plants, the Survey added.
India emerged as the fourth largest producer of crude steel in the world during January-November 2011 after China, Japan, and the US. Its crude steel production grew at a compounded annual growth rate of 8.4 per cent during 2006-07 to 2010-11.
“The increase in production is driven by 8.8 per cent growth in crude steel capacity mainly in the private-sector plants and high utilisation rates during this period,” it said.