Nikkei India Manufacturing PMI rose to 54.7 in December 2017 from 52.6 in November.
Calendar year 2018 begins with a glimmer of hope and the economy has a reasons to cheer, as India’s services sector bounced back to modest growth in December after contracting in the previous month.
The eight core sectors of the economy grew 6.8 per cent in November 2017. Also, the Indian manufacturing sector ended the year on a strong note, on the back of the sharpest increase in output and new orders.
To note, Nikkei India Manufacturing PMIrose to 54.7 in December 2017 from 52.6 in November.
Actually a steep rise in cement and steel output pushed up core sector growth to a 113-month high of 6.8 per cent in November from 5 per cent in October. Also, the latest data showed auto sales grew at a robust pace in December and this indicated that demand for flat steel was growing considerably.
Strong demand from auto and capital goods segments and a pickup in construction activity, following higher spending by the government led to sharp demand for cement and steel.
Now, steel import from China has come down to 5 million tonnes from 10 million tonnes. With stability returning to the steel sector globally, the optimistic outlook for the industry amid record volumes, a price recovery and higher demand have boosted the confidence of the steel-producing companies in India.
Recently, Tata Steel’s board decided to freeze final capacity of the Kalinganagar Greenfield steel plant at 8 million tonnes per annum (mtpa). The crude steel expansion from 3 mtpa to 8 mtpa will cost Tata SteelBSE 1.26 % Rs 23,500 crore and it will be completed within 48 months.
Taking into account its existing 10 mt capacity at Jamshedpur, the project when completed will raise Tata Steel’s total domestic steel capacity to 18 mt from an existing level of 13 mtpa. Besides strengthening its presence in the construction sector, products manufactured at Kalinganagar will help establish Tata Steel as a major player in the large diameter water pipeline segment.
India is in the midst of a wave of urbanisation and this is likely to boost demand for not only steel but also other base metals, such as copper and iron. As majority of steel goes into the construction sector, the government’s infrastructure push will remain main demand driver.
Also with an uptick in the economy and improved consumer sentiments, flat Steel used in the white goods industry, consumer durable industry and automobile industry will continue to see huge demand.
In the forthcoming budget, the government is expected to focus on faster resolution of tax disputes, better implementation of new reforms and infrastructure development. Now the conversion of the unorganised sector into the organised sector may lead to further industrial growth of the economy.
Post GST, the tax environment in India has been a sore point, because of delay in refunds. Once the tax refund regulation eases, we are likely to see more enthusiasm among manufacturers from almost all sectors and this would aid growth in the economy.
(The author is Chairman and MD, SMC Investments and Advisors. Views and recommendations given in this section are his own and do not represent those of EconomicTimes.com. Please consult your financial adviser before taking any position in the stock/s mentioned.)