The FINANCIAL — A gauge of manufacturing activity in India fell to a seven-month low in September, providing fresh evidence that a recovery in the South Asian economy remains sluggish, according to Nasdaq.
The seasonally adjusted India Manufacturing Purchasing Managers’ Index, prepared by Markit, fell to 51.2 from 52.3 in August, according to Nikkei research released on October 1. A figure above 50 indicates an expansion while a reading below that signals contraction.
“Growth of Indian manufacturing production was weighed down by a difficult economic climate,” Pollyanna De Lima, an economist at Markit, said.
New orders rose at the weakest pace since June, with export-order growth slumping to the slowest in two years. As a result, manufacturers cut jobs to keep costs in check.
“This bodes ill for the economy in the near-term and suggests that manufacturers’ expectations for future output growth are clouded with uncertainty,” Ms. De Lima said.
Input prices fell for the second straight month–the first back-to-back decline since the financial crisis–benefiting from a sharp fall in global commodity prices. However, weak demand pressured manufacturers to lower prices.
India’s economy grew 7% last quarter, much weaker than the 8%-plus growth the government had predicted in the federal budget presented in February.
Earlier this week, the Reserve Bank of India’s slashed its main lending rate by a bigger-than-expected 0.50 percentage point, highlighting growth remains weak despite high optimism in the economy.
Nevertheless, an improvement in the manufacturing sector, which has been at the center of Prime Minister Narendra Modi’s economic agenda, is taking place gradually.
Ms. De Lima said India’s growth prospects for the July-September quarter are encouraging, with the manufacturing sector looking set to provide a stronger contribution to gross domestic product than it did in the April-June quarter.