SBI Composite Leading Indicator Signals Contraction In GVA For Q4FY19 Towards 6%

State Bank Of India (SBI) says that its Composite Leading Indicator (CLI) which has a one-quarter lead over non-agricultural GDP growth is signaling a contraction in GVA for Q4 FY19 towards 6%. Interestingly, food inflation and retail inflation in general have not picked-up despite increase in MSP. Though credit growth has picked-up after dipping in FY17, but it has not been broad based with credit offtake seen mostly in Government and high rated customers. However, the bank still believes that the current slowdown could be transitory, if proper policies are adopted in interregnum.

SBI, in the latest edition of its research publication Ecowrap, noted that initial trends in Q4FY19 exhibit overall decline in sectors such as Telecom Equipment & Infra Services; Agro Chemicals; Petrochemicals; Infrastructure Developers & Castings, Forgings & Fasteners. Pharmaceutical companies dependent on exports are likely to report poor growth numbers. In Q4FY19, of 384 companies more than 330 companies exhibited negative growth in mid-line and bottom-line.

The bank noted that significantly depressed rural prices is disturbing rural income and weak demand is affecting the FMCG sector. Behind the veil of corporate results, one issue that is engaging attention of the market is the recent data issues. Consumption demand is also showing signs of moderation as revealed by various leading indicators. Automobile sector has also shown lackluster performance with domestic sales, production and export all witnessing deceleration in growth. Also, percentage of leading indicators of both urban as well as rural demand showing acceleration has significantly reduced in recent months.

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