Steel industry is considered as the backbone of Indian economy. This is because steel serves as a key raw material for various industries. Steel consumption in India has grown at a CAGR (compounded annual growth rate) of 7.4% during FY04-17 and has significant potential for growth as country’s per capita steel consumption is 61 kg (incl. rural consumption at 10 kg) which is much lower than the global average of 208 kg.
C&S accounts for more than 60% of India’s total steel consumption
In 2017, Indian government announced new National Steel Policy (NSP) in which it stated that the country’s steel demand is expected to grow threefold to 212-230 MnT in next 15 years i.e. by 2030. However, even with this demand of finished steel by 2030-31, India’s per capita consumption is likely to reach only 160 kg, which will be still lower than the current global average of 208 kg.
Although steel is used in many sector, the highest steel consuming sector in India is construction and infrastructure. According to JPC data, in FY17, about 62% of steel consumption comes from construction and infrastructure sector followed by engineering sector (22%) and then automobile sector (10%).
The construction sector uses both flat and long products. While flat products are used in bridges, steel structures and roofing; long products are used in reinforcing concrete, masonry structure, etc.
Boost to C&S sector from the government
In order to drive steel demand in the country, the government has classified construction and manufacturing sectors in to various sub sectors like rural development, urban infrastructure, roads & highways, railways etc.
Over the past five years steel demand in India has weakened due to slack in construction and infrastructure activities as the sector complained of delay in orders to start the announced projects amid unavailability of funds . However, this trend of weak demand is likely to reverse in coming years and steel consumption is expected to grow at a CAGR of 6% over FY17-23E.
In budget 2018-19, Indian government gave major push to the infrastructure sector by allocating more than INR 1.00 lakh crore. Let us look at the budget allocation for infrastructure projects by the government for FY19.
| Infrastructure Expenditure | FY17-18 | FY18-19 | Growth |
| Capital & Development expenditure for Railways | INR 1.31 lakh | INR 1.48 lakh | 13% |
| Allocation for road sector | INR 60,671 crore | INR 70,544 crore | 16% |
| Allocation for transportation sector including rail, roads, and shipping |
INR 2.40 lakh crore |
INR 1.34 lakh crore |
44% |
| Upgradation of Mumbai railway station | – | INR 40,000 crore | |
| Establishment of 160 kms rail line in Bengaluru | – | INR 17,000 crore |
NSP’s targets for C&S sector
In NSP, the government has chalked out plan of housing for all by 2022 as well as schemes such as Pradhan Mantri Awas Yojna, Saansad Adarsh Gram Yojna etc. While efforts will also be made to increase the steel usage in making railway station, foot over bridges, rail coaches, construction of steel based railway colony buildings especially in seismic prone areas, and construction of more steel bridges for saving time and capital expenditure.
The demand projected under NSP for infrastructure sector is estimated to be 90 MnT while for infrastructure sector it is 45 MnT by 2030-31.
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