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" ...The task facing us right now
is to ensure that India strides ahead; that the growth momentum is not
only maintained but thrives as well... "
Fiscal 2004-05 opened amidst mixed feelings of trepidation and optimism for Indian steel. Trepidation - as the perceived domestic raw material availability/affordability crisis spills over into the opening month of the new fiscal, with reports of production cutbacks and restrained domestic availability pouring in. On the international front, the development that has the steel fraternity shaken is the conspicuous slowdown in the rate of Chinese buying as efforts continue to be put in place by the world leader in steel production-consumption, to rein in an overheated economy. The Chinese Scare has already started fueling speculation as to the possibility of international steel prices heading for a major crash as globally, following the withdrawal of China from the market, demand conditions weaken while supply remains on a steady uptrend. Under such circumstances, domestic steel prices, irrespective of the Sino-Indian volume of steel trade, would be adversely impacted - we have past precedence of this outcome of the reach of globalization. Nevertheless, all said and done, today it is the streak of optimism that makes itself more discernible in the attitude and outlook of the Indian iron and steel industry. The last two years have reinforced the feel-good factor and the recovery process has been significant enough to restore the much-needed confidence in industry spirits. The performance results have borne witness to this fact, which is already being translated into long term plans of capacity expansion, upgradation of product-mix, intensifying R&D activities and optimizing marketing strategies, as the general macro-economic policies of the day continue to evolve and throw up newer challenges to operate - and thrive - in a globalized economy. Steel, as an industry, is therefore on a path of continuous evolution.
Growth is `in'. While the Asian bloc is spearheaded by the awesome growth performance of India with its record ten?per cent third quarter GDP growth and China, the South East Asian economies are also displaying stable growth trends. In the developed bloc, the recovery of the American market continues to gain momentum, but the surprise turnaround is in the Japanese market, where sustained upward trends in business investment, consumer spending and exports, have led to a higher-than expected economic growth. For the quarter ending March 2004, Japanese GDP grew by a real 1.4 per cent which exceeds the initial estimates of 0.9 per cent! For steel, such fast-paced growth bodes well as it indicates a resurgence in indigenous industrial/manufacturing activities, which in turn constitutes a key element in reinforcing the recovery process of the global economy.
The Indian growth scenario remains strong on fundamentals - going by the latest report of the National Council of Applied Economic Research (NCAER) on its barometer of corporate outlook - the Business Confidence Index (BCI). For the month of April 2004, the BCI is higher by 4 percentage points over its level in January 2004 and an impressive 23-percentage point higher than its level in April 2003. Asserting the presence of the feel-good factor in real terms in and across corporate boardrooms, the growth performance of the industrial sector, recovery of the capital goods and the consumer durable segment are being considered the main reasons for the upswing in business sentiments.
Similar sentiments on economic buoyancy are reflected in the other recent survey reports published by leading think tanks. The Federation of Indian Chambers of Commerce and Industry (FICCI) in its core sector survey has come out with projections of half-early growth which are considerably higher than corresponding period of last year. Embodying recent recovery and growth trends, the FICCI report has projected strong growth for industries like steel, cement, refinery sector, electric power generation, crude oil during the April-September 2004-05 period. The Confederation of Indian Industry (CII) in its Quarterly Review has also expressed optimism about growth with GDP projections touching the 6.6 to 7 per cent range in 2004-05, riding high on the upswing in industry and service sector growth. The RBI in its `Credit and Monetary Policy' announcement has adopted a cautious stance on the evolving growth process laying down a policy package geared to provide adequate liquidity to meet credit growth, support investment and export demand and pursue an interest rate regime favorable to sustain the present growth momentum and price stability. GDP growth for fiscal 2004-05 is pegged at 6.5 to 7 per cent range. As further confirmation of India's emergence as a key global player is the upgradation of its world competitiveness ranking. In its annual `World Competitiveness Yearbook, 2004' - a study of 60 nations across the world, conducted by the prestigious International Institute of Management Development, India has been ranked 34th: up 16 notches from being 50th since the last survey. Considered as one of the most authentic ranking of countries as per their global competitiveness, the present rankings reveal India to be at its best in last five years.
The task facing us right now is to ensure that India strides ahead; that the growth momentum is not only maintained but thrives as well. The electoral process being over and with a new government in place, the expectations are high - particularly where formulation of the growth strategy is concerned. This indeed needs careful planning - the sensitivity of the Indian bourses towards policy prescriptions and changes there in has been displayed amply in recent times. While the broad economic policies of the day should remain in place, efforts need to be directed at core issues - at all levels, including socio-economic factors - facing and possibly obstructing the attainment of the point of take?off for economic growth. Its achievement would also indicate the satisfaction of the necessary and sufficient condition for the `Big Push' theory, significantly elevating the status of India as an economic powerhouse to the world at large.
( J P Singh Joint Secretary, Ministry of Steel & Chairman, JPC)
(This is excerpted from JPC Bulletin Apr' 04)
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