The Indian government has announced a comprehensive stimulus package to help businesses tide over demand disruptions caused by the COVID-19 pandemic. The government has offered collateral-free loans to Micro, Small & Medium Enterprises (MSME) and extended the deadline for affordable housing Credit Linked Subsidy Scheme (CLSS) till March 2021. This will likely increase the demand for finished steel and raw material.
Across India, there are 15,62,000 apartment units under construction in seven major cities, of which nearly 39pc are in the affordable segment priced below Rs400,000, according to Anarock Research. Homebuyers can avail subsidized loans under the CLSS scheme, which will help real estate companies clear their unsold inventory and gain work capital to restart stalled construction work.
The construction sector accounts for over 60pc of India steel demand. India’s finished steel demand contracted by 91pc in April 2020, while domestic steel production fell by a record 69.6pc compared to April 2019, due to the COVID-19 pandemic. Steel producers could benefit if real estate sector recovers.
The stimulus package announced by the Prime Minister will help restart various industrial activities, and will boost domestic steel demand, said an official at state-owned steelmaker Sail.
Secondary steel mills were less optimistic about the announcement. Sources informed Davis Index that government has announced several such measures previously and most failed to boost demand. New measures have been introduced this package which could benefit the steel industry, but the government’s implementation rate is very low.
All eyes are on MSME loan scheme which promised easy access to capital for a speedy revival of business operations. If the MSME scheme works out as planned, it might help the economy. Much also depends on the auto sector, which needs major backing up from the government as it is very crucial to spur demand for finished steel.