Record Output and Sector Shift

India's steel industry is shifting focus from just increasing production volumes to emphasizing green steel, replacing imports, and expanding exports. The fiscal year 2026 marked an all-time high, with crude steel production hitting 168.4 million tonnes (MT), a 10.7% year-on-year increase. This rise reflects strong industrial momentum, with finished steel consumption growing about 7-8% to 164 MT, mainly due to steady activity in infrastructure, construction, railways, and manufacturing. This performance shows India's growing industrial role, making it the world's second-largest steel producer with a 7.9% global share in 2024.

Government Policies Boost Investment

Government initiatives are key to this transformation. The Production Linked Incentive (PLI) scheme for specialty steel has been a strong driver, attracting investment pledges of ₹44,106 crore through its first phases (PLI 1.0 and 1.1). Companies have already invested ₹23,022 crore, creating 2.4 million tonnes of specialty steel capacity and over 13,000 direct jobs. The latest PLI 1.2 phase, started in November 2025, has boosted this further. 55 companies committed to 85 projects, expecting ₹11,887 crore more investment and about 8.29 MT in new capacity. At the same time, safeguard duties, like the 12% levy on certain flat steel products from April 2025, have helped domestic producers. They widened the price gap with imports, especially from China, offering better pricing protection and encouraging local sourcing.

Focus on Green Steel and AI

India is aiming to lead in sustainable steel production. India was the first country to introduce a Green Steel Taxonomy in 2024. It defines green steel as production with an emission intensity under 2.2 tonnes of carbon dioxide equivalent per tonne of finished steel. As of March 31, 89 steel units had achieved green steel certification, covering 12.34 MT of production. Further showing this commitment, the Union Budget FY27 set aside ₹20,000 crore over five years for carbon capture technologies (CCUS). Artificial Intelligence (AI) adoption is also speeding up. Initiatives like the AI in Steel Pavilion encourage collaboration to improve efficiency in mining, logistics, production, safety, and sustainability. Major companies like Tata Steel and JSW Steel are using AI for predictive maintenance and process optimization, showing a move towards Industry 4.0.

Top Companies and Global Outlook

Leading Indian steel companies are performing strongly, boosting the sector's overall health. JSW Steel reported its highest-ever annual crude steel production of approximately 30.14 million tonnes in FY26, up 8% year-on-year, alongside robust revenue of ₹1.68 lakh crore and EBITDA of ₹22,904 crore. Tata Steel achieved its highest-ever annual crude steel production in India at 23.48 MT in FY26. Jindal Steel & Power recorded record production of 9.25 MT in FY26. Analysts are largely positive. HSBC started coverage on JSW Steel and Jindal Stainless with 'Buy' ratings, and kept a 'Buy' on Tata Steel, pointing to a multi-year demand increase driven by infrastructure and urbanization. Globally, steel demand is projected to grow modestly by 0.3% in 2026, with India identified as the fastest-growing major market, expected to see demand rise by 7.4%.

Challenges: Costs and Global Trade

However, significant challenges remain. Switching to green steel requires large investments, estimated at $2-4 billion per million tonnes of capacity. The cost of green hydrogen is a major hurdle. Indian steelmakers currently have higher carbon emissions per tonne than the global average. Planned capacity expansions often rely on coal-based production methods, which could increase emissions in the medium term. Rising coking coal prices also add to cost pressures. On the trade front, the European Union's Carbon Border Adjustment Mechanism (CBAM) is a major challenge. It could cost Indian steel exports up to $14.5 billion by 2050. Global oversupply, especially from China, and geopolitical uncertainties also create volatility and limit export options. Difficulties in adopting advanced technologies like AI, along with dependence on policies like safeguard duties, show potential weaknesses.

Looking Ahead

India's steel sector is set to continue its growth, backed by government infrastructure spending and expanding manufacturing. Demand growth is projected to accelerate to 9-10% in FY2027, driven by a renewed push in infrastructure projects. Capacity expansion targets aim for 300 MT by 2030, with the PLI scheme for specialty steel set to add 8.7 MT by FY31. Despite global pressures and the costs of reducing emissions, strong domestic demand, strategic government support, and growing use of advanced technologies suggest the sector will remain resilient and continue to expand.