Manufacturing activity in India picking up in May, but outlook bearish: SBI report

18 May 2015


Manufacturing output saw some slight pick-up in May, after sluggish growth in April, but persisting ''weak demand conditions'' could have a negative impact on the industrial output going ahead, says a research report released by the State Bank of India.

The SBI Monthly Composite Index, a leading indicator for manufacturing activity in Indian economy, inched up from 46.8 in April 2015 to 53.8 in May 2015. However, the outlook remained bearish, says the report.

''We believe that due to continued tepid credit growth and subdued commercial vehicle sales in recent period, a negative impact may precipitate in June/July 2015 IIP,'' SBI said, adding that ''this will subsequently reflect in our Composite Index values, going forward.''

The yearly SBI Composite Index for May 2015 decelerated to 56.4 in May from 58.2 in April 2015, due to entrenched disinflationary impetus and weak demand.

An index value of less than 42 means large decline, while 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, SBI said.

''We are overly concerned regarding the weak demand conditions that are refusing to pick up. Inflation numbers will continue to surprise on the downside, with retail inflation likely to be at sub 4 per cent within the next 2-3 months, and this will not be a result of only base effect, as widely believed,'' the report said.

SBI said ''overall, with economic growth currently patchy and plagued with weak demand and low capex, corporate earnings are likely to remain subdued for most sectors barring few exceptions.''

According to SBI, infra activities will start possibly from the second half of this year as the government would be in a position to push the projects.

''With the government doing its bit, it is imperative to improve sentiments further through another round of monetary easing,'' the report said.

The central bank has lowered its policy rate twice so far in 2015, but maintained a status quo in its last monetary policy review on 7 April on fears of unseasonal rains impacting food prices.

The next review meeting is scheduled on 2 June, although the previous two cuts have taken place outside the scheduled policy reviews.

Business History Videos

History of hovercraft Part 3...

Today I shall talk a bit more about the military plans for ...

By Kiron Kasbekar | Presenter: Kiron Kasbekar

History of hovercraft Part 2...

In this episode of our history of hovercraft, we shall exam...

By Kiron Kasbekar | Presenter: Kiron Kasbekar

History of Hovercraft Part 1...

If you’ve been a James Bond movie fan, you may recall seein...

By Kiron Kasbekar | Presenter: Kiron Kasbekar

History of Trams in India | ...

The video I am presenting to you is based on a script writt...

By Aniket Gupta | Presenter: Sheetal Gaikwad

view more