Charting post-Covid world Exports & policy support to lift steel

From lockdowns, economies across the globe are now entering the unlocking phase though in a cautious mode particularly in India where there is little respite from the continuous spiraling of Covid-19 infection cases.

- Sumit Maitra & Tamajit Pain

Even after partial easing of lockdown, construction sector may not witness upsurge in activities during the rest of the year as it would be a major challenge getting labour back on board and completing ongoing projects.

Subdued government spending on infrastructure, decision by the finance ministry to freeze all new projects except those part of the Atmanirbhar Bharat initiative will also impact demand for steel.

Government stimulus package

The central government’s economic stimulus package is in the nature of medium to long term reforms for various sectors including medium and small scale sector, the mining and housing sector.

The focus has been inclined towards the supply side to provide an impetus to activity in the medium term while demand-side focus has been more towards relief rather than any changes in the tax structure or announcement of capex spending.

Absence of demand-side push might delay the recovery in automobile sector, one of the key steel-consuming industries while some policy easing would help the housing sector in terms of generating demand for middle-income houses.

The auto sector has been witnessing one of the worst cyclical downturns over the past six quarters, and the segment is likely to remain under pressure in the near term too.

The improvement in auto markets of China and Korea indicates that the Covid-19 related pain is temporary and it is expected that full recovery of the auto sector would kick in the next financial year on the back of pent-up demand.

Out of the ₹20 lakh crore Covid-19 package which has been announced, bulk of the allocations have been directed towards social sector spending and enabling credit flow to the stressed sectors of the economy.