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Business News/ Opinion / Capex revival
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Capex revival

Indian crude steel production seems to be on course to finally cross the 100 million tonne mark this fiscal year

The rapidly shrinking excess capacity is also one reason why there has been a bidding war for insolvent steel firms such as Bhushan Steel and Essar Steel. Photo: BloombergPremium
The rapidly shrinking excess capacity is also one reason why there has been a bidding war for insolvent steel firms such as Bhushan Steel and Essar Steel. Photo: Bloomberg

Indian crude steel production seems to be on course to finally cross the 100 million tonne mark this fiscal year. It now seems likely that the steel industry will hit capacity constraints unless new investment plans are finalized soon. There are also early signs of a pick-up in capex in the steel industry. The rapidly shrinking excess capacity is also one reason why there has been a bidding war for insolvent steel firms such as Bhushan Steel and Essar Steel.

All this matters in a macro sense as well. Most economists agree that India cannot have a sustainable growth recovery unless private sector investment activity picks up. The strong growth in consumer spending—backed by a surge in household debt—will also ensure that more capacity will soon have to be created in the automobiles supply chain. There are already early signs of this as well. It seems that industrial capex is beginning to bounce back—though it is for now being led by brownfield capex to increase the capacity at existing factories rather than greenfield investments to build new factories. That will come later.

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Published: 28 May 2018, 12:58 AM IST
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