India's steel sector is poised for a significant upswing, with demand projected to rise by approximately 9% in both 2025 and 2026. This growth is fueled by consistent expansion across all steel-consuming sectors, particularly infrastructure and construction.
Key Drivers of Growth
Several factors are contributing to this optimistic outlook. Increased government spending on infrastructure projects, including railways, roads, urban and rural development, power, renewable energy, and civil aviation, is a major catalyst. These projects are expected to boost steel consumption in the coming years. Furthermore, a revival in the automobile sector and continued growth in the oil and gas sector are also expected to contribute to the rising demand for steel.
India's Position in the Global Market
India has emerged as the world's second-largest producer of crude steel. In FY25, the nation's output reached 151.14 million tonnes of crude steel and 145.30 million tonnes of finished steel. For the period between April and July 2025, crude steel production stood at 54.19 MT, while finished steel production reached 51.46 MT. The country's steel production capacity had increased to 200.33 MT as of FY25 and is projected to reach 300 MT by FY30.
Challenges and Opportunities
Despite the positive outlook, the Indian steel industry faces several challenges. One of the primary concerns is the limited domestic availability of coking coal, a crucial raw material for steel production. India currently imports approximately 90% of its coking coal needs. The industry is working with the Coal Ministry to increase domestic coking coal production and reduce import dependence.
Another challenge is the high cost of financing in India compared to other developed countries like China, Japan, and Korea. This adds to the final cost of steel production, making Indian steel less competitive in the global market.
Rising input costs are also putting pressure on the margins of steel producers, especially micro, small, and medium enterprises (MSMEs). While larger steel producers may be able to absorb these cost increases more easily, MSMEs may face financial strain.
Despite these challenges, the Indian steel industry has significant opportunities for growth and expansion. The growing demand for infrastructure development worldwide presents a major opportunity for Indian steel producers. Additionally, with increasing concerns over carbon emissions, India has the potential to become a leader in green steel production by adopting sustainable manufacturing processes.
Government Support and Policy Initiatives
The Indian government has been supportive of the steel industry, introducing the National Steel Policy in 2017 to guide the industry's growth trajectory until 2030-31. The policy envisions increasing steel-making capacity to 300 million tonnes per annum by 2030-31. The government is also planning a scheme to promote clean steel technologies, cut carbon emissions, and support net-zero goals, with a focus on secondary steel producers.
Outlook
The Indian steel sector is well-positioned to capitalize on the next wave of growth, driven by strong domestic demand and government support. While challenges remain, particularly regarding raw material costs and environmental concerns, the industry is taking proactive steps to address these issues. By focusing on sustainable practices, technological advancements, and strategic global partnerships, India can further strengthen its role in the global steel industry and achieve its ambitious production targets.
