Mumbai: Indian manufacturing activity shrank for a fourth straight month in February as the global downturn hurt demand and soured business sentiment, a survey showed on Monday.
Hard times: A car factory in Surajpur, Uttar Pradesh. India’s economy slowed much more than expected in recent months, slumping to its weakest pace in almost six years in the October-December quarter. Ramesh Pathania / Mint
The ABN Amro Purchasing Managers’ Index (PMI), based on a survey of 500 companies, rose to a seasonally adjusted 47 in February, from January’s 46.7. A reading above 50 signals economic expansion while a figure below 50 suggests contraction.
Manufacturing makes up about 16% of India’s gross domestic product.
The country’s once roaring economy has slowed much more than expected in recent months, slumping to its weakest pace in almost six years in the October-December quarter as the global financial crisis slashes demand for its exports and prompts consumers to cut spending. Banks have also grown more averse to extending loans, further throttling economic growth.
Indian policymakers have responded to the slowdown with a slew of steps aimed at shoring up faltering demand. The central bank has aggressively cut its policy rates since mid-October, and expectations of further cuts are growing.
The economy grew 5.3% in the December quarter, the government said on 27 February, below forecasts of 6.2% and the previous quarter’s growth of 7.6%.
Both the central bank’s short-term lending and borrowing rates are at their lowest levels, 5.5% and 4%, respectively, since the policy rates were introduced in 2000.
Earlier this month, the government forecast the economy would expand 7.1% in the fiscal year ending March, but signs are growing that global economic conditions have been steadily worsening.
The PMI survey, which is compiled by the UK-based Markit Group, comes well ahead of official statistics. Government data showed industrial output rose an annual 2.4% in November.