CHAPTER 1 INTRODUCTION

The Iron and Steel Industry in India Steel industry reforms particularly in 1991 and 1992 have led to strong and sustainable growth in Indias Steel industry. Since its independence, India has experienced steady growth in the steel industry as the successive governments that have supported the industry and pushed for its robust development. In 1991, a substantial number of economic reforms were introduced by the Indian government. These reforms boosted the development process of a number of industries- the steel industry in India in particular- which has subsequently developed quite rapidly. The 1991 reforms allowed for no licenses to be required for capacity creation, except for some locations. Also, once Indias steel industry was moved from the listing of the industries that were reserved exclusively for the public sector, huge foreign investments were made in this industry. Yet another reform for Indias steel industry came in 1992, when every type of control over the pricing and distribution system was removed, making the modern Indian Steel Industry extremely efficient, as well as competitive. Additionally, a number of other government measures have stimulated the growth of the steel industry, coming in the form of an unrestricted external trade, low import duties and an easy tax structure. India continually posts phenomenal growth records in steel production. In 1992, India produced 14.33 million tonnes of finished carbon steel and 1.59 million tonnes of pig iron. Furthermore, the steel production capacity of the country has increased rapidly since 1991-2008. In 1992, the total consumption of finished steel was 14.84 million tonnes. In 2008, the total amount of domestic steel consumption was 43.925 million tonnes. With the increased demand in the national market, a huge part of the international market is also served by this industry. Today, India is in seventh position among all the steel producing countries.

The following are the premier steel plants operating in India: Salem Steel Plant at Tamilnadu Salem Steel Plant at Chattisgarh Durgapur Steel Plant at West Bengal Alloy Steel Plants at West Bengal Visvesvaraya Iron and Steel Plant at Karnataka Rourkela Steel Plant at Orissa Bokaro Steel Plant at Jharkhand

India has seven large integrated iron and steel plants, of which six are owned by the public sector Steel Authority of India Limited (SAIL) and one by the private sector, Tata Iron and Steel Company Limited (more popularly known as Tata Steel or TISCO). The countries to which India is exporting Iron ore are Belgium, Chile, China, Iran, Japan, Korea, Pakistan, South Africa, Turkey, etc.

CHAPTER 2
RESEARCH METHODOLOGY

Problem statement:To examine the causality between imports and exports of iron and steel in India during the globalized era of the 1990s

Objective: 1. To study whether there exits causal relationship between iron and steel import and export during period 1991-2010.
1. To study if there is uni-directional causality 2. To study if there is bi-directional causality

2. To identify the level of dependency and relationship.

Research Design: Descriptive Design This type of design is used when one wants to study the characteristic of certain groups such as age, income, occupations, etc. Descriptive designs are well structured designs. So for this topic Causal nexus between iron and steel Imports and Exports in India during the Globalized era we are have used descriptive designs.

Data collection: Secondary data. For secondary data www.rbi.org has been referred.

Sample size: We have considered the data during the globalized era i.e. the period from 1991-2009 as we want to study the causality between iron and steel imports and exports during globalized era.

Statistical Tools:Granger Causality Test and simple regression Here we used Granger test to know the direction i.e. whether increase of imports cause exports or vice-versa or both causes other. If the former is true there exist a uni-directional relationship and if later is true there exist a bi-directional relationship. After deciding the direction we have used Regression to find the correlation and level of dependency. In regression analysis, we are concerned with the estimation of one variable for a given value of another variable. When there are two variables X and Y and if Y is influenced by X then we get a simple linear regression to find impact of X on Y. (Here X and Y could be exports or imports). The test has been undertaken on the annually data of iron and steel export and import from 1991-2009 financial year

Type of Data: Ratio

Benefits:1. The forecasting and predictions about the imports and exports of iron and steel can be
made.

2. The trend in iron and steel imports and exports during the globalized era can be
examined.

Limitations:1. Here we have considered the annual data of iron and steel imports and exports but the

monthly data is not considered which could have given more justified analysis. 2. We have assumed both iron and steel imports and exports are stationary at first difference level i.e. integrated of other one

3. We have assumed that both iron and steel imports and exports is cointegerated with each other signify the long term relationship between them.

CHAPTER 3 FINDINGS AND CONCLUSION

Trend in imports and exports in India during the globalize era (iron and steel)
(in Rs. Crores) financial year YEAR 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 IMPORT 2112.98 1969.45 2254.89 2493.61 3653.4 4837.6 4865.6 5281.4 4474.2 4123.8 3553.5 3976.2 4566.9 6921 11995.3 20242.8 290714.4 34980.8 43580.2 44356 56790 EXPORT 289.1 378.41 886.53 1782.77 1659 2330.3 2732.9 3250.6 2436.2 3609.6 4697.8 4283.4 8982.3 11385.7 17617.8 15709.6 23704.5 21928.1 26780.6 24790 23456

Source:-handbook of statistics on Indian economy, RBI--2010

In 1991 the imports of iron and steel was Rs. 2112.98 cr which increase to Rs. 290714.4 cr in 2007 showing the highest import and lowest to Rs. 1969.45 cr in 1992. While the exports of iron and steel which was Rs. 289.1 cr in 1991 increase to Rs. 26780.5 cr in 2009 showing the highest imports. One can also observe the continuous increase in iron and steel exports during the period.

Significance Of Granger Causalty test:

The Granger causality test is a statistical hypothesis test for determining whether one time series is useful in forecasting another.Ordinarily, regressions reflect "mere" correlations, but Clive Granger, who won a Nobel Prize in Economics, argued that there is an interpretation of a set of tests as revealing something about causality.

A time series X is said to Granger-cause Y if it can be shown, usually through a series of t-tests and F-tests on lagged values of X (and with lagged values of Y also included), that those X values provide statistically significant information about future values of Y.Thus Through Granger Causalty test we can explicitly determine that whether exports can be forecasted utilising the import series or vice versa.Thus Granger causalty is one of the significant tools to determine whether one series is potent enough to estimate other time series.

1.

Granger causality test. : There exist bi-directional relationships i.e. both cause each other.

(a) Ho: imports does not granger cause exports H1: imports does granger cause exports

(b) Ho: exports does not granger cause imports H1: exports does granger cause imports

Pairwise Granger Causality Tests Date: 11/24/11 Time: 20:15 Sample: 1991 2011 Lags: 2 Null Hypothesis: IMPORT does not Granger Cause EXPORT EXPORT does not Granger Cause IMPORT Obs 19 F-Statistic 1.46524 8.90800 Probability 0.26437 0.00319

Here the probability of the hypothesis of situation a is 0.26437 which is greater than 0.05 at 95% level of significance which means that the null hypothesis has failed to be rejected and the alternate hypothesis H1 is rejected i.e. imports does not granger cause exports. The probability of the hypothesis of situation b is 0.00319 which is less than 0.05 at 95% level of significance which means that the null hypothesis is rejected and the alternate hypothesis H1 is accepted i.e. exports does granger cause imports.

2. Regression

Ho: There is no significant relationship between imports and exports of iron and steel H1: There is significant relationship between imports and exports of iron and steel

Table 1 Regression Statistics

R Square Observatio ns 0.4365 78 19

Significance F
Regressio n 0.01234 5

Coefficients Interce pt 12345.8 5.31245 export 6

The simple regression equation for iron and steel imports and exports from the above table:Iron and steel Imports = -12345.8 + 5.312 Iron and steel Exports Form this equation we and forecast the iron and steel imports.

The R square i.e. exports 0.436578 shows that exports affect 43% of imports.
Table 2 Regression Statistics
R Square Observatio ns 0.4365 78 19

Significance F
Regressio n 0.01234 5

Coefficients
Interce pt import 7456.06 3 0.08988 5

The simple regression equation for iron and steel imports and exports from the above table:Iron and steel Exports = 7456.063 + 0.090 Iron and steel Imports Form this equation we and forecast the iron and steel exports. The R square i.e. exports 0.436578 shows that imports affect 43% of exports.

As the significance value is 0.01 is less than 0.05 at 95% level of significance in both the cases, so the null hypothesis is rejected and the alternate hypothesis i.e. H1 is not rejected i.e. there is significant relationship between imports and exports of iron and steel i.e. if the imports are increasing exports are also increasing or vice versa.

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Conclusion: The purpose of this report was to get an idea about, researchers whether

export is affecting import or import is affecting export of iron and steel in India and for this, granger causality test has been applied in this research. The granger causality test shows that imports does granger cause exports as well as exports does granger cause imports. That means that import and export both are influencing each other.
The second purpose of this research is to predict the future imports and exports

by using the past data and for this, regression analysis is used. By applying regression analysis, following results were found.
a) Iron and steel Imports = -12345.8 + 5.312 Iron and steel Exports. b) Iron and steel Exports = 7456.063 + 0.090 Iron and steel Imports

Regression analysis gave the above equation by which exports and imports can

be predicted. By R square analysis it is found that exports affect 43% of imports, Moreover, if the imports are increasing exports are also increasing or vice versa.

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BIBLIOGRAPHY

http://www.rbi.org.in/scripts/AnnualPublications.aspx?head=Handbook%20of %20Statistics%20on%20Indian%20Economy-----export of principal commodity--------date 11/09/11

http://www.rbi.org.in/scripts/AnnualPublications.aspx?head=Handbook%20of %20Statistics%20on%20Indian%20Economy-----import of principal commodity---------date 11/09/11

http://dbie.rbi.org.in/InfoViewApp/listing/main.do?appKind=InfoView&service= %2FInfoViewApp%2Fcommon%2FappService.do of principal commodity-----------date 15/11/11

Journal of Applied Finance vol. 13 No 1 2007.ICFAI university

Date:-16-09-2011 , Data from the below websites is used for Introduction and conclusion

www.steelexchangeindia.com/insidesteel/.../SSOverview.htm - Cached

www.developmentfirst.org/india/reports_ministries/steel/overview.pdf

steel.nic.in/overview.htm - Cached - Similar

www.ide.go.jp/English/Publish/Periodicals/De/pdf/94_04_09.pdf

en.wikipedia.org/wiki/Economy_of_India - Cached - Similar

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www.developmentfirst.org/india/reports_ministries/steel/overview.pdf

steel.nic.in/overview.htm - Cached - Similar

www.steelexchangeindia.com/insidesteel/Home/SSOverview.htm - Cached

www.ide.go.jp/English/Publish/Periodicals/De/pdf/94_04_09.pdf

ies.lbl.gov/iespubs/41844.pdf - Similar

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