Contribution of Steel Industry in Indian Economy

Contribution of Steel Industry in Indian Economy

There is a significant contribution of steel industry in Indian economy. Rising from the eighth position in 2002, India is now the third-largest crude steel producer in the world and expectations are that it will be the second-largest producer come 2016. Together with the iron industry, steel industry is among the basic industries in India and it plays a vital role of strengthening this country’s economy. The steel industry in this country is modern with sophisticated steel mills. There is also continuous modernization of the sector and upgrading of older plants with an aim of making them more energy efficient.

What has led to the significant contribution of steel industry in Indian Economy?

To make a significant contribution to the economy, the Indian steel industry has had to undergo significant growth to reach the capacity of producing 90.5 million tons per year in 2014-2015. In June 2015, India produced 7.4 MT in a single month which was the third largest level of steel production globally. The modernizations of this sector combined with investments that are being made in the sector have led to the growth of this sector and its ability to make significant contribution to the economy.

Steel industry in India has been riding high on resurgent economy as well as the increasing steel demand. In 1991 and 1992, the steel industry became de-licensed as well as de-controlled respectively. In 1992, steel price regulation was abolished. Since that time, market forces’ interplay has determined the prices of steel. Prices of the raw materials in India influence the prices of steel domestically. Other factors that influence prices of steel include market conditions and trends of international prices. However, the government acts as a facilitator monitoring the conditions of the steel market and adopting fiscal as well as other measures on the basis of its assessment. Although steel items are not charged export duty, steel excise duty is set at 12.5%.

How the steel industry contributes to the Indian economy

The presence of the steel industry in India has been very critical to the growth of the economy.

This can be illustrated by the following:

  • Due to the presence of the steel industry in India, modern plants have been established in the country without relying on foreign aid.
  • New plants have been modernized and upgraded leading to more production in different sectors of the economy.
  • Due to the upgrading of plants in different economic sectors, India has become more energy efficient.
  • Modern processing plants for raw materials which include those engaging in coal washing have been established.

India uses steel in manufacturing electrical machinery, transport and textile equipment as well as other metal products. 12.5 percent of the produced steel in India is consumed domestically. If the proposed plans for the expansion of the Indian steel industry are implemented within schedule, this country will eventually become the largest steel producer globally.

Growth opportunities to enhance the contribution of steel industry in Indian economy

There are opportunities for the growth of the steel industry in the Indian private sector. There is a new industrial policy that is set to open up the industry to private investments through the removal of the steel industry from the list of the industries that are specifically reserved for the public sector while exempting compulsory licensing for this sector. In India, importing foreign technology is allowed. Even foreign direct investments are allowed to a certain limit under the automatic route. The Steel Ministry plays a significant role as a facilitator by providing assistance and directions to the existing and new plants in a liberalized scenario.

Policy liberalization in the industry and other government’s initiatives has provided impetus for new entries, private sector’s growth and participation. Modernization of the current units and the establishment of new plants are also enhancing the growth of the steel industry as well as its contribution to the economy.

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