India's Steelmakers Face Struggles Amid Construction Slowdown and Tax Cuts

India's small steelmakers are grappling with weakened demand, rising inventories, and falling prices, underscoring a construction slowdown. This comes despite New Delhi's significant consumer tax cuts, the largest in eight years, aimed at boosting growth and countering harsh U.S. tariffs.

Although India's economy grew 7.8% in the April-June quarter, exceeding analysts' expectations, the slowdown in steel demand points to caution regarding the sustainability of rapid growth. The Indian government slashed taxes on hundreds of consumer goods last month, including components essential to steel demand like small cars and cement, to spur consumption and counter the impact of U.S. tariffs.

Small steel producers, representing about 45% of India's approximate 200 million metric tons of total steel capacity, have reduced production by up to a third. This reduction is attributed to weak construction activity and stagnant demand from the automotive sector. Heavy rains have further decelerated construction-related demand, exacerbating the industry's woes amid rising input costs like iron ore and electricity.

(With inputs from agencies.)