The SBI Composite Index, an indicator for tracking India's manufacturing activity in the country bounced back and entered the expansion territory in February. The yearly SBI composite index for February 2016 inched up to 51.3 (moderate growth) from 47.3 (low decline) in January 2016. However, it has registered a month-on-month decline to 49.5 (low decline) in February 2016 from 52.4 (moderate growth) in January 2016.
The report noted that the credit growth touched a 10-month high as on February 5. However, refinancing constituted much of the credit growth; hence it may be difficult to say whether credit growth has picked up materially or in a sustained manner. Further it highlighted that bank credit to domestic export sector suffered due to fall in external demand as visible in major export sectors like textile, gems and jewellery. This has led to contraction in demand of credit. Furthermore instances of dumping have made revival of certain sectors difficult, thus depressing the demand of credit. In case of pure intermediate goods sector like mining, the fall in commodity prices dented margins in mining. At the current low levels of prices, it is difficult to market a low grade ore with higher extraction cost.
As per the SBI’s composite index, a value of less than 42 means large decline while a value of 42 to 46 means moderate decline, 46 to 50 (low decline), 50 to 52 (low growth), 52 to 55 (moderate growth) and above 55 (high growth). Manufacturing activity in the country bounced back and entered the expansion territory in February. The SBI Composite Index mirrors the credit demand in the country, and other data sets available in public domain.