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There will be moderation in economic activity going forward, according to the latest reading of the yearly State Bank of India (SBI) Composite Index.
The yearly SBI Composite Index for the month of January 2016 has dipped below the 50-mark and stood at 47.3 (implying ‘low decline’ in Index Value terms), the lowest in 12 months, the bank said in its research report ‘Ecowrap’. Last month, this index was at 54.5 (moderate growth).
The monthly index also decreased marginally from 52.7 in December 2015 to 52.4 January 2016. SBI Composite Index reading from 52 to 55 translates into an Index Value that indicates moderate growth. According to the report, one of the reasons for the loss of momentum in SBI composite index is the base effect.
The report assessed that construction, steel, and textile are some of the sectors that are facing clear headwinds and thus need to be addressed head-on.
In the last calendar year, out of ₹509,478 crore worth of tenders published for various projects (in sectors such as roadways, water supply, community services, railways, power distribution, irrigation, and hospitals) projects worth ₹293,073 crore were awarded. Thus, the ratio of project award to tender published is 0.58, which indicates that 42 per cent of the tenders floated, during last 12 months, are yet to be awarded. Hence, this calls for concerted and faster execution going forward.
Regarding the textile sector, Soumya Kanti Ghosh, Chief Economic Adviser and General Manager, SBI, suggested that the government could think afresh to skew its existing TUF (textile upgradation fund) allocation in favour of manufacture of technical textiles. This will also promote exports and bolster the government’s make in India campaign.
The report noted that the steel sector is not looking good as of now. In Punjab, in last two years, almost 150 units faced closure at Mandi Gobindgarh, the centre for production of secondary steel, it added.
In this regard, the report proposed that one of the several steps the Centre could take is to push for Eastern Dedicated Freight Corridor to alleviate some macro issues relating to nearness to markets and ports for exports.
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