Prime Minister of India - Dr. Manmohan Singh

PM's address to CII Steel Summit -"India Vision 2020 - Challenges Ahead"

"At the very outset, let me commend the CII and all those associated with the Summit for focusing on the challenges facing Steel industry and for adopting a Programme of Action entitled "India Vision 2020". The year 2020 is not far away. Yet, the market environment and the state of industry may be very different from what we imagine now. Steel happens to be an industry where there are cyclical ups and downs and therefore it is very essential that in our analysis of the demand we must make a distinction between cycle and the trend. Consider the fact that even a decade ago, few had predicted the kind of demand being generated for steel today. Investment in an uncertain world is both an act of faith and a function of expectations. The state of expectations today, about India's growth prospects, is indeed very positive. You must, therefore, think boldly about the future.

India today is investing about 34 per cent of our GNP. It is a rough rule of thumb that everywhere fifty per cent of all investment happens to be in construction activity.

Construction is nothing else but steel and cement and, therefore, that perspective should call planning for the future. A future of steel in our country is indeed very bright. We have to make up our minds how best we can come up to the expectations of our country in the rising level of demand. As I see it, you have two challenges facing you. The challenge of rising demand for better quality steel and the challenge of growing competition. The question before you is whether we are prepared to deal with the challenge of change? Indian companies, be they in steel or any other sector, have to become globally competitive. Globalisation has come to stay and we cannot wish it away. In the same way in a nation any industrial transformation is a fact of life and, therefore, throws up many challenges. It helps those who are farsighted to take advantage of the technological change. It hurts those who believe in consequences of not living up to the adaptation and change that in a nation and technical progress bring along today. As far as competition is concerned we have already brought down the average tariff rate down to 5 to 10%. While competition is bound to increase, so will opportunities. The global demand for steel is likely to continue to rise for quite some time to come.

The Indian steel industry has gone through a period of restructuring. There has been a thorough overhaul of the policy regime. This has helped India improve its ranking among global steel producers from the 9th place to the 7th place. Yet, compared to the global average per capita consumption of 150 kgs. our per capita consumption of steel is still a mere 39 kgs. per head. Even by Asian standards we have a long way to go in the consumption of steel.

In India too, demand is bound to grow. This is why there is growing interest in investing in our steel sector. Our manufacturing costs are internationally competitive today and we have to ensure that they remain so in years to come. The increasing number of global steel majors who have announced plans to set up steel-making facilities in India gives a fair indication of the comparative advantage of manufacturing steel in India provided we can create the right policy environment. I would like to assure you that our Government would do whatever is necessary to ensure that our industry is able to meet the growing demand for steel. It is your responsibility to ensure that good quality steel is available at reasonable prices.

The growing self-confidence of our steel industry is demonstrated by the fact that Indian producers are now enlarging their global reach and presence. The efforts of Indian producers to acquire mines abroad for assured input linkages is further evidence of the growing maturity of Indian steel companies. While I commend our business leaders for their global vision and reach, I urge them to pay equal attention to market opportunities at home. I want the Mittals and the Tatas, and all others who are eyeing global opportunities, to also invest more at home. India is a land of opportunity. Don't miss this moment! It is a combined responsibility of both Government and industry to work together to realize this vision.

In the last 5 years, the production and consumption of steel has grown at rates exceeding 9% per annum. The pace of growth has further accelerated in the current year to over 10%. Sustaining such growth on a fairly large base is indeed creditable. The Eleventh Five Year Plan projects a 9% average annual growth in our GDP. We should expect to see therefore a massive increase in investment in infrastructure. Consequently, there is bound to be a massive growth in demand for steel in the next few decades - perhaps to levels never visualized before.

It is, therefore, essential that we address the challenges facing the development of the industry at home. Our Government has formulated a National Steel Policy to address these and other structural constraints on growth. I compliment my colleague Shri Ram Vilas Paswan for his leadership in this regard. The Steel Policy sets a production target of 110 Million Tons of steel by 2020. But this may well be surpassed before that date. Some forecasts suggest that our steel-making capacity could double, from around 40 Million Tons today to about 80 Million Tons by the year 2012.

But, if we have to meet this demand efficiently and at reasonable cost, the steel industry must modernize and modernize fast enough. Energy saving must acquire a new meaning and content. Environment friendly technologies must be given utmost scope for being operationalised. The only way to stay consistently profitable in the world horizon is to ensure that the Indian steel industry is benchmarked with the most globally competitive producers everywhere. We have recognized the fact that the steel industry is an infrastructure dependent industry. We are aware that its future growth would require improved transportation infrastructure and energy resources. The government will support every effort of the industry in meeting these requirements and to ensure that necessary linkages between industry and its inputs such as mining are operationalised.

Our Government is committed to the industrial development of our country. I am aware that there are still some hurdles that investors face in doing business in India, but it is our sincere desire to help industry to overcome these constraints. We have taken many steps to improve the business environment in India. I am heartened to see that many recent surveys and indices of business confidence have shown growing confidence in India. But I am also aware of the fact that there are still number of hurdles to cross.

I would like to stress that our government is committed to a policy of growth with equity and social responsibility. The steel industry has a huge requirement for land. These needs must be balanced against larger social concerns with respect to equitable development and inclusive growth. I do not see any reason why there should be a conflict between the growth of industry and society at large. The development of modern industry should be a common societal goal for all of us. However, this can be ensured only when every section of society is convinced that it has benefited from the growth processes in an equitable and just manner.

There has been some controversy in the recent past on industrial policy, but I am sure the people of India want to see India progress industrially and progress fast enough. As I said recently in Parliament, we have to recognize that in a country like ours where the average size of landholding is so small, there are severe limitations to what you can do to improve agricultural productivity and employment in agriculture. The long-term solution to the problem of agrarian distress has to be to take people away from agriculture, to manufacturing, to services and other non-agricultural pursuits. Thus, the industrialization of our country, creating an environment in which industry can create lot more jobs than before, is a priority concern. There are issues pertaining to land alienation and displacement of people, and these must be addressed and we shall address them to the satisfaction of all.

In conclusion, let me say to this august gathering of business leaders that you have a national responsibility too. You have been the beneficiaries of the development process in our country. You are the trustees of societal wealth. While your creativity and spirit of adventure and enterprise has helped you grow, you have also benefited from the national effort. It is, therefore, important that you reinvest in the national effort.

A comment has been made recently that most of our business leaders who have become billionaires seem to be operating in either relatively protected business environments, in oligopolistic or monopolistic markets or are dealing in scarce resources. If this observation is true then someone could say that we are promoting crony capitalism. That certainly should not be the case. The wheels of industry must move and move in all directions to enrich every region and every segment of our society.

I am sure Indian enterprise can compete and win in competitive markets too, as it has indeed done in so many sectors. We have the ingenuity and the competence to create wealth through enterprise. The shining example of Jamshed ji Tata is there to guide all of us to scale new heights. Many Indian companies have already shown that this is possible. I am confident that in years to come more of Indian business will stand up on its own feet. It will be our desire to bring that day closer. I sincerely believe Government and industry must be active partners in that national task. I wish your summit all success."