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Charting post-Covid world Exports & policy support to lift steel
Sumit Maitra & Tamajit Pain
From lockdowns, economies across the globe are now entering the unlocking phase though in a cautious mode particularly in India where there is little respite from the continuous spiraling of Covid-19 infection cases.
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Even after partial easing of lockdown, construction sector may not witness upsurge in activities during the rest of the year as it would be a major challenge getting labour back on board and completing ongoing projects.
Subdued government spending on infrastructure, decision by the finance ministry to freeze all new projects except those part of the Atmanirbhar Bharat initiative will also impact demand for steel.
Government stimulus package
The central government’s economic stimulus package is in the nature of medium to long term reforms for various sectors including medium and small scale sector, the mining and housing sector.
The focus has been inclined towards the supply side to provide an impetus to activity in the medium term while demand side focus has been more towards relief rather than any changes in the tax structure or announcement of capex spending.
Absence of demand-side push might delay the recovery in automobile sector, one of the key steel consuming industries while some policy easing would help the housing sector in terms of generating demand for middle income houses.
The auto sector has been witnessing one of the worst cyclical downturns over the past six quarters, and the segment is likely to remain under pressure in the near term too.
The improvement in auto markets of China and Korea indicates that the Covid-19 related pain is temporary and it is expected that full recovery of the auto sector would kick in the next financial year on the back of pent-up demand.
Out of the Rs 20 lakh crore Covid-19 package which has been announced, bulk of the allocations have been directed towards social sector spending and enabling credit flow to the stressed sectors of the economy.
“Unlike an investment led stimulus, the measures announced thus far by the government may not lead to an immediate rebound in domestic steel demand in the prevailing weak demand environment,” said rating agency Icra.
“Economic revival will crucially depend on proactive intervention by the central and state governments, but unfortunately, the stressed fiscal situation of the country limits their ability. The government has announced a Rs 20.97 lakh crore stimulus package, but according to our estimates, the fund infusion through fiscal operation is likely to be just around Rs 1.8 lakh crore in the current fiscal,” Rajat Bahl, Chief Ratings Officer, Brickwork Ratings, said.
Rohit Poddar, Managing Director, Poddar Housing and Development Ltd
Affordable Housing
The Credit-linked subsidy scheme for middle income group in the category of `6-18 Lakh has been extended to March 2021, or one year from the earlier deadline of March 2020.
The initiative is likely to lead to investments of `70,000 crore in housing and help boost demand for sectors like steel, cement while creating jobs.
