Budget's Rs 100 trn infra investments to buoy domestic steel use: Icra

Plan to build 19.5 mn rural houses over next three years will also strengthen steel consumption, ratings agency says in its Budget analysis

The Union Budget's aspirational investment of Rs 100 trillion over 2024 is expected to catalyse domestic steel consumption.

Besides the massive investment on infrastructure, the plan to construct 19.5 million rural houses over the next three years will strengthen steel consumption, ratings agency Icra Research said in its Budget analysis. Icra's review is predicated on the fact that construction and infrastructure sectors account for 50-60 per cent of the domestic steel consumption.

“Additionally, increased tax incentives for affordable house purchases are a positive for long steel demand. The Government has set itself a target to provide drinking water to all households by 2024 under the flagship Har Ghar Jal Mission, which would benefit domestic steel pipe manufacturers”, the report by Icra noted.

The enhanced capital outlays towards roads, railways and urban infrastructure is expected to support domestic steel consumption growth of 7-7.5 per cent over the medium term. 

For rural drinking water projects under the Centre's flagship 'Har Ghar Jal Mission', the Budget has announced 82 per cent surge in allocation for this fiscal. Railways and roads have seen hike in capital outlays by 15 per cent and 12 per cent respectively. For Metro rail projects, the Budget has 16 per cent spike in allocation.

“Government's intent to focus on infrastructure spend with emphasis on digital economy and job creation are significant announcements. Further, the aim to put a mechanism in place to attract foreign capital is an important development. We believe investment in infrastructure sector and moves to attract private capital in railways and waterways can have a positive cascading effect in the economic activity across sectors of development and growth. Connecting rural India, both physically and digitally, is another positive step for the economy. Announcement of streamlining multiple labour laws into a set of four labour codes is a progressive step”, T V Narendran, global managing director & chief executive officer, Tata Steel said in a statement.

Besides stepping up allocations for infrastructure, the Budget has raised import tariff on some stainless and alloy steel products to 7.5 per cent from five per cent. This step will offer some relief to the domestic steel companies who were assailed by cheaper imports.