Mumbai: Indian manufacturing activity shrank for a third straight month in January as faltering business and consumer confidence and a sharp global slowdown crimped demand, a survey showed on Monday.
An eight-day nationwide strike by truckers during the month also disrupted the economy, the survey said.
The ABN Amro Bank Purchasing Managers’ Index (PMI), based on a survey of 500 companies, rose to a seasonally adjusted 46.7 in January from November’s 44.4. A reading above 50 signals economic expansion, while a figure below 50 suggests contraction.
“The details of the PMI survey suggest that the outlook for the sector remains worrisome,” said Gaurav Kapur, a senior economist at ABN Amro Bank NV.
“The key forward looking activity index of new orders remains in contractionary mode, with export orders having now declined for the fourth consecutive month,” he said.
The Reserve Bank of India (RBI) has aggressively cut its policy rates since mid-October to shore up growth in Asia’s third largest economy as the fast-spreading global financial crisis fuelled a sharp worldwide slowdown.
But the central bank has left its key rates unchanged at a policy review last week as it waited to gauge the impact of previous rate cuts, and reduced the growth forecast for the 2008-09 fiscal year to 7%, with downside risks, from 7.5-8%.
“Survey details point towards slowing growth and rapidly easing inflationary pressures. This combination will provide headroom for the RBI to cut policy rates further over the next couple of months,” said Kapur.
Manufacturing makes up about 16% of India’s gross domestic product.
The PMI survey, which is compiled by UK-based Markit Group, comes well ahead of official statistics.
Government data showed India’s industrial output rose an annual 2.4% in November.