Steel choice: Cut imports or hurt capex?

The government has a tough choice to make—whether to introduce a levy on the import of cheap steel in order to protect the domestic industry or risk seeing capital expenditure dwindle in the sector.

- Nehal Chaliawala

If it does impose a levy, steel prices are likely to go up from the current multi-year lows, with a potential knock-on effect on inflation. If the government doesn't intervene, steel companies have threatened to pull out of capital expenditure (capex) plans in capacity expansion, risking India's self-reliance for steel.

India remains the only major economy with a rapidly growing demand for steel while demand falls squarely across other major markets. This has pushed many countries, especially China, to ship their excess production to Indian shores at cutthroat prices. The competition from cheap imports is making Indian mills drop their prices too, shrinking their margins.