India’s manufacturing sector growth declined in June both in terms of month-on-month as well as yearly basis amid declining exports and fall in corporate earnings, says an SBI research report.
The yearly SBI Composite Index, an indicator for manufacturing activity in the country, for June 2015 declined to 53.2 from 56.5 in May 2015.
The Monthly Index also declined from 53.7 in May 2015 to 46.7 in June 2015.
“The declining momentum in credit growth is likely to have started impacting and this is leading to decreasing momentum in IIP growth,” SBI said.
The report noted that exports growth and SBI yearly index are correlated and with exports showing some month-on-month traction in May 2015, IIP numbers for May is likely to have kept on the positive momentum.
“However, on the flip side with June 2015, SBI Index reflecting a loss in m-o-m momentum it is likely that export growth may be weak going forward,” it added.
Meanwhile, corporate results also continue to be disappointing.
Out of total sample of 3,961, 35.7 per cent corporates are PAT negative in FY15 compared with 30.7 per cent in FY14 and mid-sized companies were hardest hit.
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.
The SBI Composite Index rivals the existing data point from British lender HSBC. It has been developed on basis of the bank’s internal loan portfolio, which mirrors the credit demand in the country, and other data sets available in public domain.