SBI Composite Index for April 2015

Chandigarh, April 16, 2015: In continuation to the launch of the SBI Composite Index on December 9, 2014, State Bank of India herewith releases yearly as well as monthly Composite Index value for the month of April 2015.

The yearly SBI Composite Index for April 2015 has reached a 61-month high at 58.2 (High growth) from 54.6 (Moderate growth) in March 2015, aided by low base value of April 2014. In contrast, the Monthly Index that inched up from 47.6 in February 2015 (Low decline) to 58.5 in March 2015 (High growth) has shown a month on month poor performance of 46.8 (Low decline) in April 2015.

Weak performance of the Month on Month Index suggests that the buildup in manufacturing momentum is still patchy and erratic. The recent RBI OBICUS survey in fact points out capacity utilization as well as new orders are still a laggard.

“We believe while the medium term fundamentals look sound and promising, we need to take some corrective steps in the short term. For example, over the medium term the successful completion of the coal and telecom auctions will provide a possible blip in bank lending books (early indications are positive). Added to this, recently, there was a successful completion of the bidding process for a large road sector project. Going forward, this may also be an added source of traction for bank lending. A modest number of corporates in the mid segment have also enjoyed rating upgrades recently”, says the release.

In the short term, Infrastructure and Construction industry executing major infrastructure projects which are facing financial crisis should be given special attention. A thorough review and corrective measures are therefore immediately required as is being done. The huge amount of claims due to cost and time overruns to be paid to these firms need to be released immediately. Presently, they have been blocked into disputes and time consuming litigations whereas the practice world over is to settle such matters through Dispute Resolution Boards so that the project work or the contractors do not suffer. 

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. Index above 50 implies growth over previous respective period and less than 50 will suggest a contraction over respective period.