New Delhi: The domestic metals and mining industry, which grew at 22% CAGR between 2001-06 is in for its 19.8% deceleration in the next three years to sink at 2.2%, provided the present opposition of tribal and local people against foreign and domestic investment on repositories of metal and mineral wealth is not curbed at the right time.
This is part of the findings brought out in a paper on Metals and Mining Industry – a thought leadership report by Assocham and Ernst and Young.
* India’s metals and mining industry grew from $20.3 billion in 2001 to $43 billion in 2006, representing a compound annual growth rate of 22% in five years.
* Its CAGR rate was weaker during the period against Japan and China in which metals and mining industry registered a CAGR growth of 23.2% and 35.3% respectively.
* The compound annual growth rate of the mining industry for the period beginning 2007 and ending 2010 is predicted to be 2.2%.
* India’s consumption of steel is estimated to grow by 8% per annum and will touch 80 million tonnes by 2015.
* Domestic demand for coal is likely to increase by 7% and demand for aluminum by 10%.
* The mining sector is expected to profit from India’s proximity to major emerging markets like China, where demand for metals and minerals is also rising rapidly
* The industry is expected to decelerate from its current value growth position, growing at an anticipated CAGR of 2.2% between 2007 to 2010 period. By then, metals and mines market is expected to reach a value of $47 billion.
*The Japan CAGR is likely to fall to 6.4% while in China, the growth rate will slow down considerably with a CAGR of 1.3%.
* Reasons attributed for deceleration in CAGR for metals and mine include depleting natural resources which are putting upward pressure on prices.
* Create sizeable markets in other metals. India’s highest revenue generator is steel and the technical know-how in other metals like Zinc and Nickel is almost negligible since India does not have sizeable markets in these metals.
* Develop new technologies and sharpen mining skills in order to tap hitherto undiscovered mining zones which may be languising due to obsolete technology.
* Unless India and its states reduce bureaucratic delays, lift regulatory barriers and improve infrastructure, growth projections of the sector may remain on paper only.
* Regulatory approval for mining projects, for example, takes three to seven years in India, compared with about 18 months in Australia. Such delays tie up capital, raise project costs, and increase uncertainty among investors.
* An acceptable rehabilitation policy will have to be formulated to ensure the right investment climate for investors to enter the Indian market.