Steel consumption and economic growth: Evidence from India

Abstract This paper examines cointegration and Granger causality between steel consumption and economic growth in India for the time span of 1951–1952 to 2003–2004 in a bivariate vector autoregression format. Augmented Dickey–Fuller tests reveal that both series, after logarithmic transformation, are non-stationary and individually integrated of order one. This study finds the absence of cointegration but the existence of unidirectional Granger causality running from economic growth to steel consumption. Thus, a growth in income is found to be responsible for a higher level of steel consumption. The impulse response function divulges that GDP growth does not seem to be responsive due to a shock in steel consumption growth. Finally, this study forecasts steel demand in India till 2011–2012 and highlights the preparedness of the Indian steel industry along with required policy prescriptions to meet this demand.