SBI index indicates continued pick-up in growth momentum

The yearly SBI Composite Index for November 2015 is at a 6-month high at 54.5 (moderate growth), compared to the last month’s index of 53.5 (moderate growth), suggesting a continued pick-up in economic momentum going forward.

The Monthly Index increased to 51.6 (low growth) in November from 50.9 (low growth) in October, SBI said in a statement.

In continuation of the launch of the SBI Composite Index on December 9, 2014, State Bank of India has released a yearly as well as a monthly Composite Index value for the month of November 2015.

The index captures two components of the manufacturing cycle, namely, month-on-month and year-on-year growth on a scale of 0 to 100. An index above 50 implies growth over the previous respective period, and less than 50 suggests a contraction over the respective period.

The month-on-month growth in ASCB credit was at a 12-month high as of the fortnight ended October 30, 2015, and SBI’s internal prognosis suggests that credit growth is likely to grow in infrastructure sectors such as power and roads.

“We also expect smart growth in the personal loan segment, especially in housing (due to rationalization of risk weights and LTV ratios). The rationalization of risk weights and LTV ratios will equip banks with more capital, and our internal estimate (albeit based on certain assumptions) suggests that this RBI move would release capital worth Rs 7,785 crore for the entire banking industry," the SBI index report said.

Also, as it predicts the industrial growth two months in advance, its index numbers indicate acceleration in industrial production in the coming months.