In mid-May, India elected a new
leader and new government, a change that could pave the way for
a shakeup in the countrys industrial minerals sector.
For the first time in three
decades, India has a government with a clear majority after the
broadly right wing Bharatiya Janata Party (BJP), led by
Narendra Modi, won the election by a clear margin, taking 340
of the 543 seats in the Indian parliament.
Even though India is rich in
industrial minerals, it has been unable to exploit them fully,
partly due to pressure on previous governments to pursue
populist policies, rather than tough, economic ones.
Since 1984 and until the election
of Modi, coalitions and alliances have dominated Indian
politics, resulting in drawn out consensus building and delays
to much needed economic reforms. In the last few years, this
situation has led to ballooning government debts, a weakening
rupee and falling investor confidence.
A notable example of Indias
inefficient industrial minerals sector is the domestic
production and imports of graphite.
Despite hosting huge graphite
deposits of around 11m tonnes - second only to Chinas
reserves - Indias graphite import volumes have doubled
since 2009, to 23,291 tonnes last year. Meanwhile, domestic
graphite production has rested at around 25,000 tpa from
2008-2012, according to figures from IM
India is also has large feldspar
reserves, but a recent rise in Indian exports means domestic
consumers have resorted to importing the glass and ceramics
mineral. While feldspar production increased by 10% between
2009 and 2012, to 430,000 tonnes, imports have jumped 700% to
over 51,000 tonnes in the same period.
Prime Minister Modi has a track
record of promoting economic growth. Before becoming Prime
Minister of India, he was chief minister for the state of
Gujarat for over a decade. During that period, Gujarats
gross domestic product (GDP) outperformed other states due
largely to his policies, which have been dubbed
Modinomics by commentators.
These included reducing the
states deficit of Indian rupee (INR) 67.32bn ($1.15bn*)
in fiscal year 2001-02 to a present surplus of INR 46.02bn
($0.79bn), and attracting INR 39 trillion ($667bn) in foreign
investments via the Vibrant Gujarat Investors Summit
He has also focused on developing
the states industrial and agriculture sectors. Gujarat
now has over 10% of Indias factories, despite having less
than 5% of the population. The state has also doubled its milk
production in the last 10 years to 10.32m tonnes (9.66m litres)
Modi is expected to try and repeat
these successes on a national level, with policies that could
positively impact the countrys industrial minerals
Boost to manufacturing
One of the BJPs priorities is
to improve the productivity of Indias manufacturing
sector, with the aim of boosting exports and international
We should no longer remain a
market for the global industry. Rather, we should become a
global manufacturing hub, the BJP said in its election
Increased economic freedom
will break open the economic space to new entrants, especially
in the form of small and medium-enterprises [SMEs], creating
jobs and prosperity, it added.
Encouraging SMEs to increase
manufacturing output could translate into greater mineral
demand, including in the foundry and refractories sectors for
India also manufactures large
volumes of cement as well as ceramics and steel. Growth in
these industries is likely to increase demand for minerals such
as bauxite, magnesite, kaolin and feldspar, which could be
supplied domestically, if production can be increased.
Modi is expected to encourage
overseas miners to invest in India. Already, he is exploring
the possible breakup of state-run India Coal Ltd and allowing
foreign funds to invest in the coal sector to boost production.
Similar measures could be used to encourage industrial minerals
Another central tenet of the
BJPs manifesto was a promise to tackle corruption in the
In recent years, it has been
noticed that countrys tangible and intangible resources
have been looted with impunity, the BJP said.
The adverse result is being
felt on two sides: Firstly, the proceeds of the resources have
not gone to the public exchequer. Secondly, because of this
culture of usurping, the same resources are not available for
public purposes. The management of natural resources is marred
with either misappropriation or misallocation. This has to be
Plans to reform dealings in the
sector include setting national policies on industrial mineral
resources, specifyin how much should be utilised, at what time
and the rate of production and who should be allotted
With the agricultural sector
employing around 47% of Indias 1.2bn population,
according to data from the World Bank, Modi has also
highlighted the need to modernise and expand this industry.
Agriculture is the engine of
Indias economic growth and the largest employer, and BJP
commits highest priority to agricultural growth, increase in
farmers income and rural development, the party
Policies include increasing public
investment in the sector and reforming land acquisition to
increase the use of arable land.
Expansion of the agricultural
sector will require increased consumption of fertiliser
minerals, such as potash, phosphate and sulphur, all of which
Potash imports hit a five-year of
401,700 tonnes in 2013, compared with 297,000 tonnes in 2012.
Over the last five years, phosphate imports have jumped by 44%
to 7.18m tonnes in 2013.
If Modi succeeds in growing the
agricultural sector, this could have ramifications in the
global minerals market, as major nutrient mineral producers
such as Russia, North America and Chile increase production to
The next China?
Societe Generale forecasts that
Indias economy will experience accelerating growth over
the next three years, but says it remains uncertain whether the
country can become the next China in terms of
We are forecasting Indian GDP
to rise to 5.3% in 2014, 6.1% in 2015 and 6.2% in 2017 - only
time will tell whether Modi can translate what he has achieved
in Gujarat across the rest of India, the bank said in
recent research note.
From a commodities investment
perspective, we will likely need more time to see whether the
Indian economy accelerates to become the next China, it
*Conversions made June 2014