Mumbai: Indian steel demand may have grown at the slowest pace in at least a decade as a new government under Prime Minister Narendra Modi struggles to revive industrial output, people familiar with the development said.

The nation’s alloy consumption expanded by about 0.5% in the six months ended 30 September, according to two people familiar with the data, who asked not to be identified before an official announcement. That is the lowest in the same period since at least 2005.

Factory output at Asia’s third-largest economy fell short of estimates for a third consecutive month, data showed last week, four months after Modi became India’s 15th prime minister and vowed to clear investment hurdles. Industrial production grew 0.4% in July and August from a year earlier, slowing from an average 4.4% in the quarter through June, the government said.

Poor demand and higher alloy imports from neighbouring China led steel makers including Steel Authority of India Ltd, JSW Steel Ltd and Rashtriya Ispat Nigam Ltd to cut prices in October. The drop followed an increase in rates in the previous three months on expectations new government led by Modi would push consumption.

Steel Authority gained as much as 1.9% to 77.40 and traded at 77.05 as of 12:31pm. JSW fell as much as 2.2% to 1,115.55.

Steel ministry spokesman Naginder S. Kishor declined to comment on the alloy consumption data. The ministry collates demand and production data and usually announces the figures in the second week of every month.

Automotive demand

The pace may rebound in the second half ending 31 March to about 3% on demand from car makers and infrastructure sector, according to an average of seven steel makers, analysts and government officials in a Bloomberg survey.

The annual pace of growth may average about 2%, according to the survey.

“There may not be a galloping growth in consumption but we do expect some demand especially for infrastructure projects starting next month," Ponnapalli Madhusudan, chairman at Rashtriya Ispat, the nation’s second-largest state-owned producer of the alloy, said in a phone interview. “The new government is taking steps to boost manufacturing and clear stalled projects and that may start showing some results soon."

Madhusudan forecasts demand to climb 4% in the October-April period.

Modi on 25 September unveiled a “Make in India" campaign to entice foreign companies to build factories, boost economic growth and improve living standards that are the lowest among major emerging markets.

The government had referred 463 stalled major investment projects worth 22 trillion ($360 billion) to India’s Project Monitoring Group since its inception in June 2013, its chairman Anil Swarup said last month. The group cleared 176 projects worth 6.38 trillion, of which, 63 have begun construction, he had said. Bloomberg