The yearly SBI Composite Index reading for September 2015 has come in at a four-month high of 53.9, suggesting continued pick-up in economic momentum going forward. Last month, the index was at 53.4.

A composite index reading between 52 and 55 indicates moderate growth. The SBI Composite Index is an indicator for manufacturing activity in the economy and aims to forecast the periods of contraction and expansion.

Upward trend The upturn has mainly been driven by manufacturing, while mining and electricity are still acting as drag on the economic activity, SBI said in its ‘Ecowrap’ report. Besides, the positive trends in the capital goods sector suggest a possible pick-up in economic momentum. The index of industrial production (IIP) is also driven mainly by manufacturing (particularly capital goods), as revealed by higher ex-mining and ex-electricity growth.

“The good thing is that we are now seeing credit growth in some industries like drugs & pharmaceuticals, petrochemicals, basic metals, iron & steel, and the power sector,” the report said.

According to data released by the RBI, all scheduled commercial banks’ credit growth (Y-o-Y) improved to 9.6 per cent as on September 4, 2015, compared to the last fortnight’s (August 21, 2015) growth of 9.5 per cent and last year’s (September 5, 2014) growth of 9.2 per cent. The SBI Monthly Index, however, declined to 48.4 (Low Decline) in September 2015, from 53.1 (Moderate Growth) in August 2015.

The report said index growth is expected to be 7.8 per cent year-on-year and -3.2 per cent month-on-month.

Positive on road sector The SBI research report said it is positive on the road sector, which is employment-intensive. Going forward, the Centre plans to develop a total of 66,117 km of roads under different programmes, such as the National Highways Development Project (NHDP), Special Accelerated Road Development Programme in North-East (SARDP-NE) and Left Wing Extremism (LWE), and has set an objective of building 30 km of road a day from 2016.

“These changes are positive, and one can expect impetus in the road sector to come over the next 18 months or so,” the report said. It was observed that comfort of lenders was prioritised in framing changes to the (concession) agreement.

Some of the key measures include back loading premium payments (from fourth year), deemed termination of projects, allowing greater equity contribution from National Highways Authority of India (twice the cap), stringent penalties on non-compliance of maintenance contracts, and collection of real-time traffic data.

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