India to emerge much stronger in 2016

The year that has gone by has been a challenging one for economies around the world. However, the Indian economy stood resilient maintaining growth in a year of turmoil and volatility. The global economies including India found themselves in an alarming situation when China devalued its currency yuan which shocked the world, sending global stocks, currencies and metals commodities diving and sparking widespread fears of a currency war. A weaker Chinese currency is likely to mean weaker demand for metal commodities. The move also signaled the Chinese government growing worry about slower growth. The devaluation of the yuan also led to a further widening of trade competitiveness for Indian exporters and are likely to come under further pressure from Chinese exports. Nevertheless, its not all gloom and doom for India as the proposed 100 smart cities, enhancing port connectivity, housing for all by 2022, improving rail infrastructure, apart from high speed trains and industrial freight corridors will keep the demand for metals ever rising. NHAI’s giving clearance to stalled highway and road projects would unlock huge investment of around Rs 35,000 crores, besides the government’s plan of indigenization of defence equipment will also further steer the demand for metals. Demand for iron ore and coal is expected to see a quantum jump as implementation of infrastructure projects gather pace. Therefore, the mining sector has to be overhauled for extraction of minerals with advanced technologies and encouraging investments. While, the MMDR Amendment Act and the passage of the Land Bill are giant strides to invigorate the mining sector and setting up steel and other projects in the country, states must act in tandem to frame policies and begin auctioning the minerals. The domestic metals industry however is facing unprecedented challenges from the rising tide of cheaper imports of metals, steel in particular from China, Japan and South Korea. Protecting the domestic metals industry from external shocks is called for by bringing in some kind of a regulatory and policy framework that can ensure the long term sustainability of the mining and metals industry. In the midst of weak economical environment, the base metals were amongst the hardest hit largely due to supply glut and dramatic slowdown in Chinese economy which is unlikely to change in 2016. Among the base metals, copper fell by 24 per cent, aluminium slid 11 per cent, tin declined by 26 per cent, nickel dropped 42 percent largely on concern about market surpluses. Lead declined 4 per cent due to supply tightening. Negative investor sentiments coupled with weakening macroeconomic growth indicators particularly from China will continue to weigh on base metal industry in 2016. Deeper supply cuts by producers is an immediate necessity to balance plunging metal prices. A fast growing economy with huge investments in manufacturing, infrastructure and construction, India has all the credentials to emerge as a resolute economic power house on the eastern horizon and as we step into the New Year with renewed hope for an all-round economic growth, MMR wishes its esteemed readers and advertisers a bright and bountiful year ahead and seek your continued support.