Mumbai: Indian manufacturing activity slowed to five-month lows in February, easing from a 33-month high in December as the effects of a tight monetary policy worked into the broader economy, a survey showed on Monday.
The data provides further evidence that keeping the economy growing at around 9% will be a challenge, given inflation and supply-side constraints.
It comes three days after finance minister P. Chidambaram proposed a Rs60,000 crore, or $15 billion farm debt write-off and a cut in duties to boost manufacturing in the 2008 Budget.
The ABN AMRO Bank purchasing managers’ index (PMI) softened to a seasonally adjusted 59.5 in February, its lowest reading since September, from 60.7 in January and below December’s 61.9, which was the highest reading since the survey began in April 2005.
A reading above 50 signals expansion, while readings below 50 suggest contraction.
The PMI, compiled by UK-based NTC research and sponsored by the Dutch bank, tracks changes in manufacturing business conditions by polling 500 companies each month on output, new orders, employment and prices.
Manufacturing output has slowed in recent months as high interest rates combined with the effects of a rising currency, softening demand from consumers, and falling exports.
The output index slowed to a six-month low of 62.2 in February from 63.7 in January and the index of new orders eased to a five-month low of 68.4 from 70.0 in January.
This is the first time the new-order index has fallen below the 70 level in five months.
The export index dropped to a six-month low of 55.7 in February from 56.2 in January and the quantity of purchases made by manufacturers registered its lowest level in five months at 64.2 in February, all signs of slowing industrial activity.
But flagging manufacturing did not translate into softer prices as raw materials prices for metal, plastic and chemical products were higher, the survey said.
The input price index rose sharply to a six-month high of 57.5 in February from 53.3 in January, prompting manufacturers to raise their factory gate prices to a four-month high of 54.2 in February from 52.9 in January.
Hiring slowed with the employment index easing to a three-month low of 51.9 in February from 52.5 in January.