IMPACT OF LIBERALISATION ON

THE STEEL INUDSTRY OF INDIA

POST LIBERALISATION INDIAN ECONOMY 

INTERNAL COMPONENT - 1

GROUP MEMBERS - 
1. DHRUV RAO (2026) - 21020621144
2. KHUSHI GHANANI 
3. AAYUSHI KAUSHAL

BATCH - B

2022-23

THIRD SEMESTER

INDEX
SERIAL NO. CONTENTS PAGE NO.
1 INTRODUCTION
2
3
4
5
6

INTRODUCTION

Following Indian independence, domestic industries had substantial government protection

and oversight. However, at the start of the 1990s, India experienced a serious economic crisis.
To get out of that position, new liberalized economic policies were implemented in order to
engage with the globalized world. However, much ambiguity has arisen over the impact of
globalization on India. The goal of this study is to examine the influence of globalization on
the Indian steel sector using empirical, statistical, and analytical methodologies, as well as
strategic adjustments. "Steel" was picked since it is regarded as the contemporary economy's
backbone and is critical to its development. Liberalization policies (abolition of licencing,
price decontrol, disinvestment of public shares, decrease in customs tax, liberalisation of Ex-
Im policy, and so on) resulted in a fundamental restructuring of the Indian steel sector. In the
globalised regime, there is a spectacular positive growth rate in the production of finished
steel, which is significantly greater than the global growth rate and the pre-globalize regime.
Furthermore, in the globalised period, Indian steel manufacturers became more competitive
in terms of productivity and techno-economic criteria. India transitions from a net importer to
a net exporter. To examine the influence of changes in factor productivity, a pattern of input
substitution, technical advancement, and factor efficiency, not only empirical results but also
econometric estimation and analysis have been performed. Steel consumption has increased
dramatically, with a cumulative average growth rate of 8.45 percent, whereas the CAGRs for
Japan, the United States, Germany, and China were 0.02, 0.01, 0.02, and 10.90 percent,
respectively. In the globalisation regime, the Indian steel sector is developing in the long run,
despite occasional short-run depression. Certain strategic actions can sustain this growth
pace, and if it continues, it is projected that India will be deemed a developed nation very
soon, with a strong foundation of "Steel."

OBJECTIVES

It is true that the impact of any policy/policies is not uniform throughout all sectors of the
economy. Furthermore, it is not practical to examine the whole impact of policies on the
economy in the same research.
The primary goal of this research is to determine the influence of new economic policies
known as liberalisation policies on the Indian steel sector. Within a decade of implementing
liberalised policies, the Indian steel sector has seen significant ups and downs, creating
uncertainty about the impact of liberalisation. Economists, politicians, and bureaucrats have
all expressed their opinions based on their own research and analysis. However, a thorough
examination is still needed.
As a result, a thorough examination of local steel industry liberalisation policy appears to be
required. Furthermore, this research will take into account the growth and advancement of
many elements of the steel industry such as production, consumption, import, export,
comparative advantages, and so on.
The goal of this research is to examine the influence of globalisation on the Indian steel
sector using empirical, statistical, and analytical methodologies, as well as strategic
adjustments. "Steel" was picked since it is regarded as the backbone and critical to the growth
of the contemporary economy.

METHODOLY & SCOPE 

The Indian steel sector has entered a new stage of expansion following liberalisation, riding
high on a revived economy and increased steel demand.
The Ministry of Steel serves as a facilitator by providing general direction and assistance to
both new and existing steel plants. The New Industrial Policy Regime provides opportunities
for private-sector iron and steel manufacturing to grow. Furthermore, the government has
said that it prefers domestically manufactured iron and steel commodities in government
procurement.
The research provides both a comparative and future look at the Indian steel sector before and
after economic liberalisation. The liberalisation strategy was implemented in 1991-92.
Twelve years (1980-81 to 1991-92) were regarded pre-liberalisation, while 1992-93 to
2003-04 were termed post-liberalisation.
This study is all about exploratory research. Its goal is to investigate the situation of India's
steel industry before and after liberalisation.

THE STEEL INDUSTRY PRE-LIBERALISATION

Since the first steel mill opened in India in 1907, the Indian iron and steel industry has come
a long way.
JosiahHeath's historic project of mining and smelting iron ore at Salem and Porto-Novo was
the first large-scale manufacturing of iron and steel in India in 1829. The plant, however, was
closed down in 1867 because to excessive capital needs. As a result, the late Jamshedji Tata,
who founded the Tata Iron and Steel Company [TISCO, now Tata Steel Ltd.] in 1907,
deserves credit for ultimately launching the iron and steel business in India on a large scale.
Following independence, iron and steel output rose significantly as India tried to strategically
invest in this key industry in order to achieve national industrial transformation [D'Costa
2006, p. 8]. According to the first Industrial Policy Resolution, passed in 1948, new iron and
steel production units were to be established only by the government in the public sector,
with no disruption to existing private sector units. As a result, state ownership of steel
facilities in independent India began in the 1950s, with the establishment of certain integrated
steel plants in the public sector and a few steel units in the private sector. During the first
five-year plan, the initial push towards this industry occurred (1952-56). Massive public-
sector investment, combined with a protected market environment, created the groundwork
for a robust and competitive indigenous iron and steel industry. Unfortunately, India's steel
capacity was not increased significantly over the next two decades, the 1960s and 1970s,
since the overall economic downturn slowed expansion. However, in 1991-92, the nation
replaced the control system with liberalisation and deregulation as part of the New Economic
Policy, and this phase was reversed.

ECONOMIC REFORMS

Since 1991, the government's economic reforms have contributed new dimensions to
industrial growth in general, and the steel sector in particular. Among the specific steps
implemented were:

1. Abolition of Industrial Licensing for Steel - Except for specific locational

constraints, the licencing need for capacity growth was eliminated, and the steel
industry was removed from the list of industries designated for the public sector.
2. New Liberalised Import/Export Policies - The industry was included in the list of
‘high priority’ industries for automatic approval for foreign equity investment up to
51 per cent. This limit has recently been increased to 100 per cent. Price and
distribution controls were removed with a view to make the steel industry efficient
and competitive. 
3. Custom Duty Reduction - Restrictions on external trade, both in import and export,
were removed with drastic reductions in import duty. 
4. General Policy Actions - Changes in excise tax, disinvestment of shares in the
public sector, and currency depreciation, among others, benefitted the Indian steel
industry.
THE STEEL INDUSTRY POST-LIBERALISATION

During the four decades after independence, the industry was strictly restricted and
controlled.
Liberalisation, on the other hand, resulted in a major overhaul of the Indian steel
industry. Soon after noting the high predicted demand for steel, the industry increased
capacity in three ways:

(i) Addition & Expansion - While older units are being modernized/expanded, a huge
number of new steel plants have been built in various parts of the nation using contemporary,
cost-effective, cutting-edge technology. SAIL and TISCO, the two biggest manufacturers,
have undergone massive modernization programmes and enlarged their installed capacity.
(ii) Green Field Plants - The quick and sustained expansion of the demand side in recent
years has also spurred domestic entrepreneurs to establish new green field projects in various
states across the country.
(iii) Big Manufacturing Additions Made - In the post-reform period, the private sector has
experienced a surge of additional capacity.

Now, let us first examine the amount of Total Steel produced in the country or Total
Finished Steel through the records below:
Source: JPC, The Joint Plant Committee of India
Analysis: In 2016-17, the country produced 100.74 million tonnes (mt) of total finished
steel (alloy/stainless + non-alloy) for sale, up from 14.23 mt in 1991-92. The high
proportion of the Majors and Other Producers (as defined by the categorization system
in use until 2013-14) in total finished steel production for sale was primarily owing to
abundant raw materials, capacity development, and the appearance of new units in
both categories, among other factors.
Second, we look at the import of Iron and Steel around the same period.
Source: JPC, The Joint Plant Committee of India

Next, we look at the Exports for the same period,

Source: JPC, The Joint Plant Committee of India
Analysis: The country produced 100.74 million tonnes (mt) of total finished steel
(alloy/stainless + non-alloy) for sale in 2016-17, an increase from 14.23 mt in 1991-92.
The high share of Majors and Other Producers in total finished steel output for sale (as
defined by the classification method in use until 2013-14) was mostly due to ample raw
materials, capacity growth, and the introduction of new units in both categories, among
other causes.
This is evidence that Liberalisation has truly positively impacted the Steel Industry in
an immense manner
Furthermore, due to sustained local demand, India's steel sector has grown rapidly in
the recent 10-12 years. Since 2008, output has increased by 75%, while domestic steel
consumption has increased by roughly 80%. Steel-making capacity has grown in
lockstep, and the expansion has been rather organic. 
It is true that "steel," like many other industries, rises in a cyclical pattern. Since the
beginning of the economic liberalisation process, the steel sector has risen at a positive and
faster rate. Domestic producers eventually overcome the post-liberalisation short-run
downturn. The Indian steel industry's boom would not have been feasible without the
liberalisation of industrial policy and other steps made by the government from time to time.
Liberalisation policies have provided a clear push for private sector entrance, involvement,
and expansion in the steel industry. So, if this development rate in this sector continues,
India will undoubtedly be labelled a "Developed Country" within a few years, and this
would be based on the Steel Industry, which would not have been feasible without
economic freedom or globalisation.

The industry’s future - Given India's low per capita steel consumption, the Indian steel
sector has enormous potential. Domestic capacity expansion and R&D expenditures are
likely to meet the demand for higher-quality steel products. The green drive is
anticipated to make steel manufacturing more environmentally friendly and less
expensive. All of this is likely to make India Atmanirbhar in steel, allowing India to
maintain its net steel exporter position. Furthermore, India has now established itself as
a steelmaking site for global businesses. The global steel sector looks to be racing to
invest in high-growth markets like India. As a result, the Indian steel sector has a
promising future. The steel industry is vital because of the numerous applications of
steel. The post-pandemic rebound is extremely beneficial to the building and
infrastructure industries. This is in addition to government changes, which are
contributing to growth. The car industry is predicted to increase steel consumption due
to increased demand for electric vehicles. Indian steel consumption is estimated to reach
170 MT by 2025, with capacity reaching 180-190 MT. Furthermore, the government
anticipates that India will have a $5 trillion economy by 2025. Given these facts, the
future of the steel industry in India is bright, and the steel sector is likely to boost the
Indian economy.

Bibliography 
Websites:
https://www.researchgate.net/publication/
280727004_The_Performance_of_Indian_Iron_and_Steel_Industry_and_Competitivene
ss_of_the_Firms
https://www.researchgate.net/publication/331737050_Trade_liberalization_and_firm-
level_productivity_A_panel_data_analysis_of_the_Indian_iron-steel_industry
Research Papers:
 Debdas Karmakar - University of Burdwan, West Bengal, India
GLOBALISATION AND THE DEVELOPMENT OF INDIAN STEEL
INDUSTRY
 Posted - 2008
 JPC, The Joint Plant Committee of India
DEVELOPMENT OF INDIAN STEEL SECTOR SINCE 1991
Posted - July, 2017

Plagiarism Report  - 

   

The Liberalization of industrial policy and other initiatives taken by the Government have
given a definite impetus for entry, participation and growth of the steel industry.