India’s Steel Sector is at its Critical Juncture with China’s Imports Going on the Rise

The Indian steel sector is reaching a critical juncture of intense pressure caused by the onslaught of rising imports, mainly targeting small and medium enterprises. A remarkable shift has occurred with imported Chinese steel, thus turning India into a net importer of steel. According to official data, the volume of steel imports rose sharply from 4.67 million tonnes in the 2021-22 fiscal year to 8.32 million tonnes in the 2023-24 fiscal year.

India’s MSMEs are highly worried about the fast-growing dominance of cheap Chinese steel. Between January and July 2024, steel imports from China rose an astonishing 80% to 16.1 lakh tonnes against 9 lakh tonnes in the same period last year. Consequently, smaller Indian mills are struggling hard to remain competitive, with some reducing operations and others even planning layoffs.

Experts are demanding that the government introduce targeted measures in the next budget to tackle this flood of imports. These include innovative investment and incentive schemes, specifically designed for MSMEs. Former Steel Secretary Aruna Sharma has suggested a safeguard or anti-dumping duty on steel imports to protect the domestic market in India. She also proposes this duty to be extended to Free Trade Agreement countries whose imports disrupt the market.

However, such measures may rather have a negative consequence. Experts are warning that the higher import duty could increase input costs for MSMEs, pushing them further into financial distress. Increasing stainless steel products have already caused multitudes of Indian MSMEs to scale back their operations, a rise of 548% from 2019.

Industry leaders such as Anubhav Kathuria, MD of Synergy Steels, call for the government to implement a holistic package. This will include financial assistance to MSMEs to cushion the blow and policy measures that can strengthen the domestic steel production chain. He even proposes a safeguard duty of 25% on certain imports to keep local producers competitive.