The Hindu Business Line : India to turn major metals consumer

The Finance Minister, Mr P. Chidambaram's growth-oriented Budget with emphasis on strengthening the social sectors and infrastructure is attracting international attention, and from unexpected quarters. Metals market is one, for instance.

There is evidence that global players in the metals market, especially base metals, are closely following developments in India. Increasing expenditure on infrastructure and rising personal incomes of the middle-class usually translate to higher consumption demand for metals. While rising importance of China as a major consumer of commodities - both agricultural and non-agricultural - has escaped no one's attention, India's potential for demand growth is less publicised.

Consumption of industrial metals in the third largest economy in Asia and the world's second most populous country has been growing over the years, albeit from a much smaller base compared to China, Barclays Capital pointed out in its report on Tuesday, adding that clearly, it will be some time before India will have the same impact on global demand as China has today. India's potential to take on a more crucial role in global demand in the future, particularly once western economies start to slow, should not be underestimated because of increasing expenditure on infrastructure and rising incomes of middle-class, the report asserted.

Listing the various initiatives, Barclays Capital said India's annual budget aimed at alleviating poverty in the country, has allocated around $2.24 billion (Rs 9,945 crores) in 2006-07 on highways development programmes, and has identified three new road projects that will be built under a new special purpose vehicle.

The country also aims to raise power generation capacity by 15,000 megawatts by March 2007, and will invest $ 4.95 billion (Rs 22,000 crores) in oil refining over the next few years. In addition, it has planned $ 3.22 billion (Rs 14,300 crores) for a rural jobs guarantee scheme that aims to tackle poverty, and $ 4.2 billion (Rs 18,696 crores) for rural infrastructure next fiscal year.

In the implementation of these projects, India will have to consume huge quantities of base metals and industrial metals including steel, copper and so on.

Pointing out that growth in Indian demand of industrial metals has been rather erratic over the past decade, Barclays Capital said, demand has been growing more consistently since 2002, a trend that is expected to continue over the coming years.