Changing Demography and Indian Steel Industry

India is the seventh largest steel producer in the world, producing 42.64 million metric tons of finished carbon steel in 2005-06. Its domestic consumption stood at over 38 million tons in 2005-06, holding sixth position in the world. Indian steel exports are mainly to the USA, EU and South East and East Asia. Indian steel production has been growing for the past 15 years at a rate of 7% per annum and is projected to grow at a faster pace. India exported over 5 million tons of steel and imported nearly 4.7 million tons in 2005-06.

In the meantime, various demographic changes are taking place in India. Rural population in India in 1991 is thrice that in 1901, while urban population in 1991 is nine times that in 1901. About 400 million Indians comprise the working population in 2001 as against 314 million in 1991. At the same time, number of enterprises and employment have grown more rapidly in rural areas, as inferred from Economic Census, 2005. India has the highest youth population (Aged 15-35 years) in the world. People aged between 15 and 59, who have the potential to contribute to the economic activity, comprise around 60% of Indian population and this is likely to increase in future. Further, the middle and higher income-classes have been expanding in India in the recent years and are expected to retain the momentum, thanks to increased economic activities in the country.

The number of people living in urban areas has risen to 27.8% in 2001 from 25.7% in 1991. Urban population in India is 285 Million, which is close to the US’ total population of 300 Million people. Further, the urban sector contributes 50-60% to GDP of India. Moreover, number of towns and cities in India has increased from 3891 in 1981 to 4378 in 2001. Number of migrants from rural to urban India has grown from 229 million in 1991 to 307 million in 2001.

All these trends point towards the fact that the country is at the threshold of a huge urbanization and consumption spree. This may lead to massive surge in steel demand along with urban construction and associated change in the lifestyle of the population. Facing such a steel demand surge, India has a recoverable reserve of 13460 million tons of iron-ore. However, reduced iron ore exports from India have grown from a mere 2 million Kgs (Rs. 16.6 Million) in 200-01 to 20 million Kgs (Rs 233.7 Million) in 2005-06, despite fluctuations over years, necessitating an import of 2.48 million Kgs of pig iron. On the other hand, iron-ore mining leases might not be given to the new steel cpacities in many Indian states. Further, tribal people need to relocated for the expansion of minig activities in the Eastern states. All these socio-economic and demographic aspects affect both supply and demand of Indian steel industry. This needs to be scrutinized further by both the industry and the government for any policy or strategic decision.