January 27, 2012

The steel story! Will Indians finally use Chinese labour to surge ahead?

I have very fond memories of a great patriotic politician of India (very few such men can be found amongst today’s politicians), Vasant Sathe. Apart from his very intelligent, practical and radical views on the tax structure, I remember how he always compared Korea to India to show how a small nation could surge ahead so fast while we kept cheating our countrymen. When I went to Korea recently, I couldn’t but help feel the same; I even wrote about this a few weeks ago in one of my editorials. In the week gone by, I had the opportunity to sit with a gentleman who is a consultant to a company called Electrosteel Steels Limited. He told me the most amazing story of a venture – for setting up a steel plant – by one Mr. Kejriwal near Bokaro on about 1500 acres of land. It is a steel plant being set up with a capacity of 2.2 million tonnes. Hearing the fascinating story (I’ll explain later on why I found it fascinating) of this plant made me remember Mr. Sathe again. Amongst various things, steel was of special interest to him – as should be to any politician with vision, for after the Stone and Bronze Age, it was the Iron Age that was decisive for building the comparative advantage for nations. And it was during the Industrial Revolution when the entire world saw and realised the power and economies that this metal could create. With the invention of steel, everythingchanged further. Today, almost all industries ranging from automobiles to defence use steel and related products extensively. Steel has been one commodity that to a large extent has been pivotal for economic development and social prosperity, and thus has been a key ingredient in the nation’s future plans. Mr. Sathe would always compare the Indian productivity to Korean productivity to explain the rot in the Indian system – and then, of course, he would invariably talk about China too. So today I thought I’ll dig a little deeper into some facts and figures about this key aspect symbolizing a nation’s development.

A recent Wall Street Journal report foretells decisive growth in China and India’s steel industry for 2012. The details are very interesting. India’s position in steel production is meek and lagging, mainly on account of government control, bureaucratic hurdles and red-tapism, coinciding with poor planning, unprofessional functioning, and poor productivity. Not just Asian countries like South Korea, but even countries like Malaysia have productivity standards much better than India’s. A research report titled “Indian Steel Industry: Outlook to 2012” predicts that Indian crude steel production will grow at a CAGR of 10% during 2010-2013. Still, India’s average consumption of finished steel is significantly less than that of its neighbours. Not only is India’s annual steel production capacity, in absolute numbers, far less than what nations like China and South Korea have; but the per capita consumption is also at a rock-bottom figure. A time-series analysis indicates that both India and China started their tryst with steel production approximately during the same time. Just after Independence, India’s and China’s annual steel production were at the same level. However, by the end of 1990, where the per capita steel consumption in China increased by 65 kg and touched a figure of 160 kg, India’s per capita consumption languished at 29 kg (an increase of just 7 kg per capita) by the end of 2003. As per the latest ASSOCHAM report, the per capita consumption of steel in India is only 35.5 kg per capita per year compared to 220 kg in China and 950 kg in South Korea.
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pinkey said...

Every think is do able when u wanna success

sonia said...

India itself has lot of man power so i don't think Chinese laborers are problem!!!!!!!!!!!!!!!!!!!!!!!!!

Parveen said...

good post ..... really helpful...!!

Alok said...

very good article
every week i read your article. you are my inspiration.

Gruhkhoj said...

nice article...already India has largest man power with greater skills..

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