India's Safeguard Duty: A Temporary Shield Against Chinese Steel Influx

A report by HDFC Securities suggests that the Indian government's imposition of safeguard duties on steel imports will primarily impact imports from China, offering limited relief to domestic producers. While Free Trade Agreements with other nations minimize the impact, the measure aims to protect India's steel industry from a surge of cheap Chinese steel.

The Indian government's consideration of safeguard duties on steel imports is forecasted to have a limited effect on the domestic steel industry, according to a report by HDFC Securities.

This report indicates that around 62% of steel imports come from countries with which India maintains Free Trade Agreements (FTAs), thus minimizing their impact on these imports.

Nonetheless, the report emphasizes the potential of such duties to mitigate the influx of Chinese steel, which has been underpriced due to a slump in China's domestic market demand.

The safeguard duty aims to elevate the cost of imported steel, making domestically-produced steel more competitive, especially against Chinese exports that do not benefit from FTA exemptions.

This has become crucial as cheap Chinese steel imports have severely undercut Indian steelmakers, affecting sales and profits.

Despite India's significant growth in steel production capacity from 1 million MT in 1947 to a projected 180 million MT by FY24, domestic consumption remains below international averages, signaling opportunities for growth.

Moreover, with rural consumption trailing, initiatives for rural development and infrastructure investment could catalyze further demand.

The National Steel Policy projects an increase in India's per capita steel consumption to 158 kg by FY31, as the nation strides towards urbanization and industrialization.