As the world’s second-largest producer of crude steel, India has frequently employed protectionist measures like import duties and export controls to safeguard its domestic steel industry. While such policies aim to boost domestic production, create jobs, and strengthen self-reliance, they often come with economic trade-offs, such as higher costs for downstream industries and reduced global competitiveness. Recently the government is considering a 25% temporary tax to curb cheap Chinese steel imports. While on the onset this can be seen as a good strategy to stimulate the local steel industry, there are nuanced takes by experts both supporting and condoning such overprotective measures.
Global steel markets are heavily distorted by subsidies and dumping practices, particularly by countries like China, whose state-supported producers account for 57% of global steel output. Anti-dumping duties and tariffs imposed by India help level the playing field for domestic manufacturers, protecting them from unfair competition and price volatility.
It is unanimously agreed that steel is critical to India’s national security and strategic projects, including defense production and infrastructure expansion under initiatives like the National Infrastructure Pipeline (NIP), valued at ₹111 lakh crore. A strong domestic steel industry ensures resilience during geopolitical disruptions, such as those witnessed during the COVID-19 pandemic, when global supply chains faced significant disruptions.
The steel industry directly employs over 500,000 workers, with many more in ancillary sectors. Protecting the industry not only preserves jobs but also stimulates local economies through forward and backward linkages. For every ₹1 spent on steel production, the economy benefits through multiplier effects in construction, manufacturing, and mining.
Companies like Tata Steel, JSW Steel, and SAIL have benefited from high domestic prices and reduced competition from imports
Protectionism inflates domestic steel prices, placing a burden on downstream industries like construction, automotive, and engineering. For example, in 2021, domestic steel prices surged to ₹70,000 per tonne, significantly higher than international rates, eroding the competitiveness of sectors that rely on affordable steel inputs. Cost overruns and delays in large infrastructure projects further impede economic growth.
Export duties imposed in May 2022 to curb inflation and ensure domestic availability led to a 50% decline in steel exports, from 13.5 million tonnes in FY2022 to 6.7 million tonnes in FY2023. This policy shift weakened India’s global market position, allowing competitors like Vietnam and Indonesia to capture larger market shares.
By insulating domestic producers from global competition, protectionist measures risk reducing incentives for innovation, efficiency, and modernization. Despite its vast production capacity, India’s steel manufacturing costs are 20-30% higher than those of global leaders like Japan and South Korea due to outdated technology, high energy costs, and logistical inefficiencies.
Automotive and construction sectors face shrinking margins and reduced competitiveness due to higher input costs.
India’s steel policies must evolve to embrace conditional and adaptive protectionism, a balanced approach that supports the domestic steel industry while minimizing its adverse effects on downstream sectors and global competitiveness.
Such as introducing tariffs that fluctuate based on global market conditions. During periods of global overproduction or dumping, higher tariffs can shield domestic producers. Conversely, tariffs should be reduced when domestic prices significantly exceed global benchmarks, ensuring affordable steel for downstream industries, which is currently being discussed by the authorities.
The economics of steel protectionism in India is not a simple binary of beneficial versus counterproductive. Its true potential lies in a dynamic, balanced approach that protects domestic interests while encouraging innovation, efficiency, and sustainability. By embracing adaptive policies that address both short-term challenges and long-term growth opportunities, India can transform its steel sector into a globally competitive, resilient, and environmentally responsible industry—one that supports national priorities while integrating seamlessly into the global economy. Such an approach would not only bolster India's position as a global steel powerhouse but also ensure equitable growth across all sectors of its economy.
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