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December Witnessed Slow Manufacturing: SBI

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Indian manufacturing activity in December improved marginally over the previous month taken over a yearly period, while the index fell more sharply on a monthwise comparison, a key macro data showed on Tuesday.

State-run State Bank of India’s (SBI) Composite Index is an indicator of manufacturing activity that helps estimate periods of contraction and expansion.

“The yearly SBI Composite Index for Dec’17 is at 53.1 (Moderate Growth), compared to 53.0 (Moderate Growth) in Nov’17. The M-o-M (month-on-month) index declined to 50.6 (Low Growth) in Dec’17, compared to 51.2 (Low Growth) in Nov’17,” according to the bank’s latest Ecowrap report.

“This indicates a possible slowdown in IIP (Index of Industrial Production – government data) growth in the next couple of months,” said the research report authored by bank Chief Economic Adviser Soumya Kanti Ghosh.

The Composite Index has mainly two indices — the SBI Monthly Composite Index and the SBI Yearly Composite Index.

“A consistent negative (positive) month-on-month forecast in the index will lead to negative (positive) growth rate in year-on-year index after a while,” the report said.

“We, however, believe, even though the momentum may have slowed down, the outlook for some of the sectors appears largely positive. One such sector is fertiliser sector,” Ghosh said.

According to SBI, the financials of the 26 fertiliser companies reported an improvement in operations in terms of operating income and net profit growth in the first half of the current fiscal.

“The bottom line of the sector grew by 34 per cent, while the top line grew by only 2 per cent,” said the Ecowrap.

“The new project announcement in the fertiliser sector is showing an upward trend with 13 projects in FY14 to 34 projects in FY17 entailing an investment of Rs 23,614 crore in FY17 from Rs 10,172 crore in FY14,” it added.

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