China's consolidation of its steel sector through planned capacity cuts, as well as stricter environment norms and mining safety inspections, has had a massive impact on the global steel industry. But, while China grapples with overcapacity issues, it is time to turn the spotlight on India, which is projected to be the single largest driver of steel demand in the next 20 years, with capacity estimated to rise over 50%. Indeed, with similar population numbers, India's steel intensity of 61 kg per capita against China's 647 kg per capita calls for attention to the massive expansion potential that the country holds.
Although there is a rationale for India to scale-up its steel making capacity, we discuss the impediments faced by the country that will make this journey challenging. Bureaucratic roadblocks to project implementation, credibility of government mandates and incentives and supply chain management of key raw materials are some of the major challenges discussed. Alongside this, we also look at the signs of progress observed in recent times.
The elephant in the room India's steel growth targets are often criticised for being overambitious and that is the very reason that the initial buzz created by any new scheme or expansion plan quickly fizzles out. On top of this, the opaque and complex nature of the steel sector's workings across different states, as well as political influence, especially in the mining industry, makes it harder to digest the optimism around growth plans. However, it is noteworthy that, despite the hurdles India faces, it has managed an average steel production growth of 5.6% in the last five years and now has the third largest steel industry after China and Japan, having displaced the USA in 2015. This growth is underpinned by the leading economic growth of 7.9% witnessed in 2016 against global growth of 2.4%. India may not be ready to soar, but it can surely run.
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