| An Introduction
The Indian Steel industry is almost 100 years old now. Till 1990,
the Indian steel industry operated under a regulated environment with insulated markets
and large scale capacities reserved for the public sector. Production and prices were
determined and regulated by the Government, while SAIL and Tata Steel were the main
producers, the latter being the only private player. In 1990, the Indian steel Industry
had a production capacity of 23 MT. 1992 saw the onset of liberalization and the Indian
economy was opened to the world. Indian steel sector also witnessed the entry of several
domestic private players and large private investments flowed into the sector to add fresh
capacities.
The last decade saw the Indian steel industry integrating with the
global economy and evolving considerably to adopt world-class production technology to
produce high quality steel. The total investment in the Indian steel since 1990 is over Rs
19,000 crores mostly in plant equipments, which have been installed after 1990. The steel
industry also went through a turbulent phase between 1997 and 2001 when there was a
downturn in the global steel industry. The progress of the industry in terms of capacity
additions, production, consumption, exports and profitability plateaued off during this
phase. But the industry weathered the storm only to recover in 2002 and is beginning to
get back on its feet given the strong domestic economic growth and revival of demand in
global markets.
With a current capacity of 35 MT the Indian Steel Industry is today the
8th largest producer of steel in the world. Today, India produces international
standard steel of almost all grades/varieties and has been a net exporter for the past few
years, underlining the growing acceptability of its products in the global market.
Steel is a highly capital intensive industry and cyclical in nature.
Its growth is intertwined with the growth of the economy at large, and in particular the
steel consuming industries such as manufacturing, housing and infrastructure. Steel, given
its backward and forward linkages, has a large multiplier effect.
Economists quantify the economic impact of any sector through measures
such as the output multiplier effect, forward and backward effects etc. Based on the
Indian input-output model, the Iron, Steel and Ferro Alloys sector (sector code 72 of CSO
Table) reveals high output multiplier of 2.64 and ranks 4 out of 115 sectors into which
the economy is divided. The output multiplier effect is defined as the total increase in
output generation (in case of sector 72, total increase of 2.64 units including unitary
increase of the sector’s own output) for one unit increases of final demand in the
particular sector.
The Forward Linkage refers to the inter relationship between the
particular sector and all other sectors which demand the output of the former as their
inputs. In the CSO table of 60 sectors (where all iron and steel sub sectors have been
merged to one sector), the Forward Linkage of the Iron and Steel sector at 4.79 is quite
significant (ranks 4 out of 60 sectors into which the economy is divided). The significant
output multiplier effect and the forward linkage effects are the compelling reasons
propelling various economies to set up domestic plants to satisfy the local demand.
Economists have estimated that for every additional one lakh rupees output (2002-03
prices) in the Iron, Steel and Ferro alloys sector, an additional 1.3 man years of
employment are created.
With capital investments of over Rs 100, 000 crores, the Indian steel
industry currently provides direct/indirect employment to over 2 million people. As India
moves ahead in the new millennium, the steel industry will play a critical role in
transforming India into an economic superpower. |
