India’s manufacturing shrank for the first time in over four years in August, dealing a fresh blow to efforts to boost a slumping currency, figures showed Monday, as rival China’s factory activity rose.
The India Purchasing Managers’ Index (PMI), which gives a snapshot of manufacturing health from output to jobs, tumbled to an unexpected low of 48.5 in August from 51.1 in July, led by a slump in new orders.
The index from HSBC is seen as a leading signal of economic momentum. A reading over 50 spells expansion of activity while one below 50 suggests contraction.
The data comes amid fears India’s once-booming economy could be on the cusp of a full-blown crisis.
The Indian figures suggest economic “growth is likely to slow further in coming months”, said HSBC India chief economist Leif Eskesen, noting the fall was led by “a decline in new orders, especially export orders”.
The Indian data contrasted with HSBC PMI figures showing China’s manufacturing activity crossed the key level from contraction to expansion, rising to 50.1 in August from 47.7 in July and fuelling hopes the country’s economy may be on the mend.
India’s PMI finding was the lowest since a below-50 reading in March 2009.
Its currency weakened Monday to 65.88 rupees to the dollar from Friday’s 65.70, snapping a two-day rally. The Bombay Stock Exchange’s benchmark Sensex was up 1.51 percent at 18,900 points on investor bargain-hunting.
The Indian data followed figures last Friday showing the economy grew by 4.4 percent in the first three months of the financial year, the slowest quarterly pace since the onset of the global financial crisis four years ago.
Eskesen said despite India’s weak growth, the central bank would keep monetary policy tight “for a while still to help contain the depreciation of the currency”.
“Combined with the heightened macroeconomic uncertainty, this will continue to weigh on growth in coming months,” he added.
India is facing its worst financial crunch in over two decades, with a rupee that has lost some 16 percent of its value since the start of the year, a record current account deficit — the broadest measure of trade — and slowing economic growth.
India manufacturing hits over 4-year low
