India's crude steel production grew 41% to 170.15 million tonnes in FY26, supported by strong infrastructure and manufacturing demand. Finished steel consumption jumped 55% over five years, reducing reliance on imports. Investors are now watching how companies utilize the ₹6,322 crore PLI scheme to produce higher-value specialty steel.
The Indian steel industry has marked a period of significant growth over the last five fiscal years, with production and consumption figures reaching new highs in 2025-26. Crude steel output rose to 170.15 million tonnes in the recently concluded fiscal year, compared to 120.29 million tonnes in 2021-22. This represents a robust 41% increase, reflecting expanded capacity across the sector to meet rising domestic demand.
Infrastructure Demand and Import Trends
Finished steel consumption grew at an even faster pace of 55%, climbing from 105.75 million tonnes to 164.36 million tonnes over the same period. This surge in demand is primarily tied to intensified infrastructure development and a growing manufacturing base in the country. A key shift noted by the Ministry of Steel is the declining reliance on foreign suppliers. Imports as a share of total finished steel consumption dropped to 3.97% in FY26, down from 4.42% in FY22, suggesting that domestic producers are successfully capturing a larger portion of the market.
Specialty Steel and PLI Investment
To move toward higher-value products, the government has been pushing the production of specialty steel through a Production Linked Incentive (PLI) scheme. With a total budget of ₹6,322 crore, the initiative aims to boost domestic manufacturing capabilities for advanced steel grades. Exchange data and ministry reports as of June 2026 indicate that participating companies have already committed capital spending totaling approximately ₹26,320 crore toward these projects. This investment reflects a strategic shift by major producers to increase margins by focusing on complex steel products rather than just commodity-grade steel.
Managing Raw Material Risks
Despite the positive production trends, the sector faces a lingering dependency on imported coking coal, which is essential for blast furnace operations. Because India does not have sufficient domestic reserves of high-quality coking coal, producers remain exposed to price volatility in global commodity markets and supply chain disruptions. The government is currently encouraging the adoption of technologies that reduce raw material intensity and promote the use of alternative processes to mitigate this cost pressure.
Investors may monitor the commissioning timelines for the new specialty steel capacities supported by the PLI scheme, as these will determine the potential for margin improvement. Furthermore, the ability of companies to manage volatile raw material costs while maintaining high capacity utilization will remain a primary factor for the industry’s profitability in the coming quarters.