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What India can learn from the global crisis

With the European crisis showing little signs of abatement despite the efforts by member countries, financial institutions such as the IMF and G-20 nations are beginning to throw their weight behind the US.

With the European crisis showing little signs of abatement despite the efforts by member countries, financial institutions such as the IMF and G-20 nations are beginning to throw their weight behind the US.

It has clocked a GDP growth of 2.1% in Q2, 2012, while the current account deficit has come down to $ 478 billion in the same period with an unemployment rate of 7.8%.

The US manufacturing sector is also showing a growing productivity. What is gratifying for the steel sector is the growth in automobile production ?at 1.5% and an almost similar growth in construction ? will boost steel consumption in the current year to as high as 8.3%.

All these positive indicators have made the US quite conscious of protecting the interest of indigenous industries suffering from excess capacity, lower margin, lack of orders and cheap imports. After so many years, the US steel industry is thrusting exports that have already reached a record level of 9.5 million tonne during the first 8 months of the current year.

It has recently obtained the approval of a WTO panel against the duty imposition by China on US export of grain-oriented electrical sheets.

Although steel imports are much lower at present (11% less in August 2012 compared to previous year), the various anti-dumping and countervailing duties imposed against HR Coils from India, Korea, CIS countries, SS Coils imports and the reimposition of the same even after the Sunset Reviews would not permit India to take advantage of the growing demand scenario in US market and its customers would also be deprived of good quality products from India

It is reported that US would not plan for any capacity enhancement in steel till 2015, which implies the current capacity utilisation at the rate of 76% would progressively rise in the next 3 years to cater to the increasing demand.

This trend in steel industry may permeate other manufacturing sectors as well, which in the aftermath of the worst phases of falling demand, cut-throat margin and excess capacity, may be extremely wary of imports from other emerging countries — not a good sign for export prospects for other engineering and manufacturing segments of India.

However, manufacturing growth phase in the US, if it becomes a regular feature, would have a profound positive impact on Indian engineering and manufacturing sector in the long term.

Other than the US, Indian industry can take a few lessons from the recent activities in the Chinese steel industry. While interest rate has been brought down to facilitate investment, the closure of unviable and polluting industries, belonging to iron and steel, ferro alloys and coke and the partnership that some of the steel plants are forging with critical sectors of the economy (Chongqing steel with Chinese ship-building industry, Baosteel developing third generation high strength steel for automobile sector) are good examples to emulate.

In 2012, around 11 mt of iron making capacity and 9 mt of steel-making capacity has been taken off in China. This particular strategy may not work out in India at present as a good number of small and medium enterprises in the country cater to the localised demand.

There is also an elaborate scheme of technical collaboration among steel industry, academic institutions and research centre to work out technical solutions to the steel plant operations, new product development, energy efficient practices and technologies. The Indian steel industry can progress very successfully by adopting a collaborative approach in areas like technology, sustainability, logistics and raw material exploration.

The author is DG, Institute of Steel Growth and Development. The views expressed are personal

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First published on: 23-10-2012 at 01:15 IST
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