Manufacturing sector growth improves in Nov: SBI Index

India's manufacturing growth improved on monthly as well as yearly basis, suggesting a continued pick-up in economic momentum going forward, says a report.

The monthly SBI Composite Index, an indicator for manufacturing activity in the country, increased to 51.6 in November from 50.9 in October.

On yearly basis, it reached the 6-month high of 54.5 in November, compared to 53.5.

The Index captures two components of the manufacturing cycle, namely, month-on-month and year-on-year growth on a scale of 0 to 100. Index above 50 implies growth over the previous respective period and less than 50 suggests a contraction over a respective period.

The report noted that credit growth is likely to grow in infrastructure sectors like power and roads. Moreover, a smart growth in personal loan segment is also likely especially in housing.

"The rationalisation of risk weights and LTV ratios will equip banks with more capital, and our internal estimate (albeit based on certain assumptions) suggests that the RBI move would release capital worth Rs 7,785 crore for entire banking industry," the report said.

The report further said that industrial production is expected to see an uptick in the coming months.

"As our SBI Index predicts the industrial growth 2-months in advance, our index numbers indicate acceleration in industrial production in coming months," it said.

An index value of 42 to 46 means moderate decline, 46 to 50, low decline, 50 to 52, low growth, 52 to 55 is moderate growth, and above 55 stands for high growth).

The SBI Composite Index rivals the existing data point from Nikkei. It has been developed on the basis of bank's internal loan portfolio, which mirrors the credit demand in the country, and other data sets available in public domain.