Indian budget's infrastructure push, decarbonization aid to support steel industry

The Indian Union Budget 2026-27's infrastructure drive is set to spur strong demand for steel while also supporting the sector's green transition.

The budget announced on Feb. 1 highlighted the government's focus on scaling manufacturing and "delivering a powerful push to infrastructure."

India's Finance Minister Nirmala Sitharaman proposed capital expenditure of Rupees 12.2 trillion for fiscal 2026-27, up from Rupees 11.2 trillion the previous fiscal year, maintaining momentum in public investment-led growth.

The "effective increase in capital expenditure, supported by measures to improve logistics and assistance to downstream MSMEs (Micro, Small and Medium Enterprises), is expected to sustain infrastructure activity and steel demand," Indian Steel Association President and Jindal Steel Chairman Naveen Jindal said on X.

In a push for infrastructure, the finance minister said the government plans to focus on India's Tier II and Tier III cities, among others, while also proposing a scheme for the enhancement of construction and infrastructure equipment.

The budget further announced a broader push into capital goods manufacturing, allocating Rupees 100 billion over five years for a scheme for container manufacturing.

This initiative could provide incremental support for steel demand, particularly for flat products used in container fabrication, participants said.

Steel industry participants, however, flagged that the demand impact would hinge on execution. "The overall impact of the budget will depend on how effectively the announced spending is utilized," a North India-based distributor said.

Decarbonisation support

The finance minister also proposed an outlay of Rupees 200 billion over the next five years for carbon capture, utilization and storage technologies, to achieve higher readiness levels in end-use applications across five industrial sectors, including steel.

Industry participants welcomed the measure as the sector has been seeking the government's support for low-carbon steel production in recent years.

"The Union Budget's dedicated support for CCUS marks a decisive step toward decarbonising India's hard-to-abate sectors... it signals that decarbonisation is now central to our industrial and climate strategy," the Confederation of Indian Industry said on X, quoting ArcelorMittal Nippon Steel India CEO Dilip Oommen.

India's adoption of carbon capture has been shaky, with limited demand, weak policy incentives and high capital costs constraining deployment, Platts, part of S&P Global Energy, previously reported.

Indian steelmakers have been navigating exports to Europe with caution amid the EU's Carbon Border Adjustment Mechanism (CBAM) that came into effect at the beginning of this year and has cemented the industry's need for low-carbon steel production.

The budget reaffirms the steel industry's long term growth prospects, as the government remains focused on promoting value-added products and the Make in India initiative, trade sources said.

Platts, part of S&P Global Energy, assessed the spot cut-to-length price of IS2062, 2.5-10 mm thick HRC, excluding the 18% goods and services tax, up Rupees 400/mt from Jan. 30 at Rupees 53,500/mt ($585/mt) ex-works Mumbai on Feb. 2.

Platts assessed the IS1786 Fe500D/Fe550D 12-25 mm diameter rebar, down Rupees 50/mt from Jan. 30, at Rupees 48,250/mt ex-works Raipur Feb. 2.