Bright days ahead for the steel sector as infrastructure beefs up spends

They say the New year brings new beginnings and hence it is most awaited. For industries, it is one of the most important times of the year as the Government announces the budget for the next financial year.?They anticipate support, relaxations and initiatives that will fuel their growth. While it turns out to be a boon for some and bane for others, basis the Government’s strategic direction. This year, the steel industry seems to have a glimmering ray of hope from the budget owing to the enhanced spends on infrastructure proposed in this year’s budget. Let’s have a detailed look:

1.?????Increase in Capital Expenditure: As per this year’s budget, there has been a 35.4 per cent increase in capital expenditure planned, reaching Rs. 7.50 lakh crore.?There are multiple infrastructure projects planned especially the expansion of roadways by 25000 km. This will further elevate the demand for steel.

2.?????Exemption on steel scrap: ?While the demand side is all set to accelerate its pace and make the top lines of steel companies look glorious, the supply side has also received its due attention with the extension of custom duty exemption on steel scrap, thus providing an impetus to bottom lines as well. It will prove to be a big relief to MSME’s.

3.?????Creation of Jobs: As the demand for steel production increases, it will create automatically lead to the need for more manpower in the industry, thus creating jobs for the skilled as well as unskilled labour.

4.?????New investments in the sector: With industry favorable policies like National Steel Policy, Production Linked Incentive scheme, and a positive budget, the industry is witnessing a new fervour and is becoming a lucrative sector for domestic as well as foreign investments.

5.?????Cost-effectiveness and decentralization of the steel industry: Several policies like vehicle scrappage policy help in decentralization of the industry as a whole. Additionally, a reduction in anti-dumping duty and customs duty will help steel manufacturers in achieving a cost-effective supply.

Right from 2020, the industry has recorded exponential growth rates. With profits multiplying and stock prices shattering 52 week high records except for a few tumultuous days in between, the industry continues to have a positive momentum and is expected to continue in the longer run. If the implementation of infrastructure projects across railways, roadways, and ports is executed as planned with optimum utilization of budgets, the steel industry is going to enjoy a long dream run.