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Can 'Make in India' alter the country's commodities landscape?

With Sambit Mohanty

May 02, 2017 02:30:00 EST (3:30)

The 'Make in India' campaign seeks to position the country as an investor-friendly manufacturing hub, with the aim to raise the sector's share in GDP sharply over the next few years. In this video, Sambit Mohanty, senior editor of oil news and analysis, talks about the key findings of the S&P Global Platts special report 'Make in India,' A New Window of Opportunity for Commodities, and how the campaign is making an impact on the oil and gas, coal, petrochemicals and metals markets.

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Make in India, A New Window of Opportunity for Commodities

The "Make in India" campaign aims to boost manufacturing's share of the economy from 16% now to 25% by 2025. The push to expand manufacturing will trigger massive requirement for oil, gas and other resources. Find out more about the opportunities and challenges in India's commodities landscape.

Download the report

Video Transcript

Can 'Make in India' alter the country's commodities landscape?

By Sambit Mohanty

Welcome to the Snapshot our series examining the forces shaping and driving global commodities markets today.

In this episode, we will take a look at the key findings of an S&P Global Platts special report looking at how the "Make in India” initiative is altering the country's commodities landscape.

The sweeping reforms have infused new momentum into the manufacturing sector. A series of new projects have been announced and implemented, helping to drive up demand for oil, coal, petrochemicals and metals. There are already signs of success.

Companies such as Shell, BP, Rosneft and Trafigura are expanding their presence.

S&P Global economists are comfortable forecasting an 8% GDP growth forecast for the next few years. This comes at a time when China’s economic growth is slowing.

Unlike the sharp recovery seen after the global financial crisis of 2008, our economists believe the current one has not only been gradual, but more sustainable.

Now let’s look at the growth prospects for various commodities, compiled with the help of inputs from CRISIL and Platts Analytics.

Crude oil demand is expected to rise at a compound annual rate of 5% until 2020.

Large gains in domestic production are not expected, raising the dependence on imports.

Regulated domestic prices and a lack of pipeline infrastructure have held back gas demand growth. Gas demand is expected to rise at a compound rate of 4% over the next five years.

While India has a surplus of refined oil products, the petrochemicals industry is a major deficit center. It's the third largest polymer market in the world, demand is growing at 10% a year, a rate that is expected to be sustained over the next decade.

In thermal coal, a rapid expansion in domestic production has seen imports peaking. Targets for increased output remain ambitious, but are likely to be successful to reduce dependence on imported coal.

Power demand is forecast to surge 44% from 2016 levels by 2020. The national system is moving into surplus.

In the steel segment, short-term steel demand growth is set to accelerate above 6% by 2021, driven by railways and urban infrastructure. While India is already self-sufficient in commercial grade steel, deficits are expected in high value-added steel.

But ensuring stable long-term energy and resource supplies will be critical to expand manufacturing. We believe that growth must be based on both the domestic market, which will require a broader distribution of income, and a more competitive economy that allows Indian manufacturers to expand in foreign markets.

There are reasons to be optimistic about the Indian growth story, as well as good grounds for caution. It is likely that India will realize at least in part its ambitions for its manufacturing sector. But the level of success depends ultimately on the continuation of the strong government policy initiatives that have been launched and implemented over the past two years.

To better understand India’s challenges and opportunities, download our special report.

Until next time on The Snapshot, we’ll keep an eye on the markets.

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