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Home > News > Cut In Repo Rate By Rbi May Spur Steel Industry

Cut in repo rate by RBI may spur steel industry

Infrawindow News Bureau




Apr. 19, 2012, 12:54 PM

Cut in repo rate by RBI may spur steel industry The Reserve Bank of India’s (RBI’s) move to cut repo rate by 50 basis points may boost construction and manufacturing activity, which may assist the domestic steel industry, which has been hit by input costs and slowing demand.

The RBI’s rate cut would make home and auto loans cheaper and will provide an impetus to these sectors languishing for a while.           

"The rate cut will lower lending rates and spur demand for automobiles, housing and corporate loans. This will provide an impetus to steel sector growth and boost steel demand," said SAIL chairman CS Verma.

In the past two years, successive input cost hikes and sluggish demand have forced steelmakers on the back foot. In 2011-12, steel production went up by 6.6%, while consumption of steel grew by only 5.5%.

This is expected that the impact will be immediate and will be felt across the industry. Prices for long steel products which mainly go into building and construction are likely to remain firm in the coming months.

Steelmakers hope this will lead to a firming up of prices and give them room to offset the adverse impact of rising input costs like coal.

"For the last two years, steel demand and growth has suffered due to steep hike in interest rates. With cut in repo rate, economic activity will get a boost. Apart from better access to working capital, large-sized investments will also pick up since corporate loans will get cheaper," said Lalit Beriwala, director, Shyam Steel Industries, a producer of TMT rebars used in building and construction activity.

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