SBI launches first home-grown index to measure economic trends

State Bank of India (SBI) on Tuesday launched a tool that will primarily track manufacturing activity to offer a forward-looking economic trends, giving the country another monthly economic index.

The SBI Composite Index rivals the existing data point from British finanical services provider HSBC.

The Index will analyse data from both manufacturing and services industries to determine expansion or contraction in the economy, SBI Chairperson Arundhati Bhattacharya told reporters in Mumbai while announcing the product.

The public sector lender has created two indices - the SBI Monthly Composite Index and the SBI Yearly Composite Index. Both fulfil complementary purposes such as month-on-month sentiment movement and year-on-year growth forecast, respectively.

The indices will also take into account other indicators of economic activities such as consumer spending, mining, interest rates, inflation and exchange rates on a monthly basis.

The SBI index has been developed on the basis of the state-run bank's internal loan portfolio, which mirrors the credit demand in the country, and other data sets available in public domain.

The indices will be released every month after Reserve Bank of India's (RBI) credit growth numbers, Bhattacharya said, adding the data collection would not be outsourced as is the case with the HSBC data.

Markers at present depend on HSBC India Purchasing Managers' Index (PMI) and HSBC India Services Business Activity Index to get clues about economic trends.

The Index will help policymakers and market participants to identify turning points in the manufacturing cycles in advance and adjust their investment plans or strategy, the SBI chaiperson said, adding it will not pre-empt anything.