New Delhi: The spike in interest rate might not impact steel demand in the country in the current fiscal as it is slated to grow by up to 11 per cent backed by higher infrastructure spending, Tata Steel said.

Speaking to reporters last evening here, company Managing Director H R Nerurkar said that there was a bit of concern regarding commodity inflation, but that has not reached to a proportion which could be dubbed as "alarming".

"There is a bit of concern on inflation. It is not as serious as a crisis. There will be bit of impact. We don't see any big problem. The situation is not alarming at all," Nerurkar said.

The apex bank, in order to rein in the runaway inflation, has increased the policy rates 10 times since March last year pushing headline inflation to over nine per cent in May this year.

Nerurkar said his hope stems from the fact that the construction was continuing and infrastructure projects, which consume most of the alloys, were also in the upswing. Steel demand in India grew by 9.9 per cent in 2010-11 to reach to over 65 MT.

"10 per cent growth in steel demand in India is feasible as long as GDP grows at around eight per cent. This year, I believe, steel demand will grow by 9-11 per cent," he said.

According to Joint Plant Committee, India's consumption of steel in April this year was at 5.030 million tonnes, up 1.8 per cent over the same month last year.

However, according to brokerage firm IDFC Securities, sales volume of the country's steel firms were hit during April and May by dealer de-stocking and the same was also likely to continue in the current month.

"Demand is weakening. Investment-led demand has consistently remained weak over the last several quarters. Consumption-led demand growth is also showing signs of weakness," the brokerage firm said.

"Unless long products' (mainly used in construction) demand improves in H2 FY'12, we expect steel demand in India to grow by just 5-6 per cent against the earlier general estimate of a double-digit growth," it added.


(Agencies)