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Four factors likely to aid the recovery of steel

Steel secretary PK Rastogi has outlined four macroeconomic factors likely to aid the recovery of steel demand in India. Rastogi was responding to a concern expressed by Harsh Pati Singhania, president, FICCI, about protectionist tendencies worldwide. In his reply, the steel secretary enumerated the following points during the recently held national conference on steel at New Delhi:

1. Expectations of 5-7% growth in GDP in 2008-09 and possibilities of GDP returning to higher growth trajectory in 2009-10.

2. Capital formation and savings rate to continue at levels exceeding 30% – Higher elasticity of steel demand with respect to growth in GDP due to investment in plant and machinery and push to construction activities.

3. Thrust on infrastructure in the 11th Plan period is expected to boost steel demand. Approval to 37 infrastructure projects worth Rs 70,000 crore between August 2008 and January 2009 will further trigger steel demand in the country.

4. Lower rate of price inflation offers room for aggressive rate cut and fillip to investment and consumption and this augurs well for the growth of steel demand.

Rastogi also stated that Greenfield capacity expansions will re-emerge sooner in India compared with other countries due to clear signs of demand prospects. However, chairman-SAIL & FICCI steel committee, SK Roongta, cautioned the industry against any ‘euphoric response’.

He further urged steel producers to adopt a collaborative approach towards demand creation, sharing of best practices, skill development, environmental protection and beneficiation of raw materials.

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