India’s annual budget could prove to be a boost to the steel sector

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India’s union budget is an annual exercise, one that industry and commerce always look forward to for direction and signals of growth.

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India’s metals sector, especially steel, had expectations from this year’s budget and seems to not be disappointed with the final document.

There were some policy announcements and some fiscal developments that have been hailed by a section of the steel lobby in India as a step in the right direction. As has been its norm for several years, India’s Finance Minister Nirmala Sitharaman laid out the plan for continued infrastructure growth.

Included in that was an announcement calling for an additional 100 new airports around the country, which is also being hailed as a positive move.

TV Narendran, managing director and CEO of Tata Steel, said in his reaction to the budget that the continued focus on the infrastructure sector by the government was good because it was steel-intensive, The Avenue Mail reported.

According to Narendran, the infrastructure sector retained the potential to kickstart the economy and boost the capital expenditure cycle.

Similar impetus announcements related to creation of more roads, urban centers and  railways are being interpreted as a good sign for steel. Initiatives such as the expansion of India’s gas grid and piped water supply to households will boost steel demand, Narendran said.

According to this report in the Hindu Business Line, the proposed hike in capital expenditure could help steel, cement and other allied sectors.

The higher capital expenditure spending by the government helps cement and steel manufacturers as well in a cascading effect.

On the other side, though, the Union Budget 2020-21 ignoring the real estate sector has puzzled some experts.

For realizing the vision of making India a U.S. $ 5 trillion economy by fiscal year 2024-25, the development and growth of its real estate sector is imperative, and it would have also added to the growth of steel and allied industries, experts say.

Meanwhile, in a separate development, ratings agency India Ratings & Research (Ind-Ra) has revised its outlook on the steel sector from “stable” to “stable-to-negative” for the remainder of the current fiscal year, citing sluggish steel demand growth expectations, moneycontrol.com reported. Ind-Ra has revised downwards its fiscal year 2019-20 steel demand growth expectations to around 4% from the previous forecast of 7%.

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The report by moneycontrol.com, quoting from a statement by the agency, said it had revised its outlook owing to mix of structural and cyclical concerns in end-user sectors, primarily automotive and real estate construction.

However, Ind-Ra expects steel demand to recover in the second half of fiscal year 2020, supported by pickup in government investments, fiscal stimulus measures, improvement in market sentiment and the second half of fiscal year 2019’s lower base.

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