A private gauge indicates that India's manufacturing sector will shrink for the first time in a year as Prime Minister Narendra Modi's unprecedented clampdown on cash hurts demand.
The Nikkei India Manufacturing Purchasing Managers' Index was at 49.6 in December, a report showed on Monday, the lowest since December 2015. A number below 50 indicates a contraction.
“Shortages of money in the economy steered output and new orders in the wrong direction, thereby interrupting a continuous sequence of growth that had been seen throughout 2016,” Pollyanna De Lima wrote in the report. “Cash flow issues among firms also led to reductions in purchasing activity and employment.”
A continued slowdown will strip India of its position as one of the world's fastest-growing big economies and risk a political backlash against Modi. PMI data is due from India's key services sector on Wednesday before focus shifts to the government's first official growth estimate for the year through March.
- New work and production fell slightly but recorded the first decrease in a year
- Payrolls decreased marginally; vast majority of panelists signaled unchanged workforces
- Input cost inflation accelerated
- “January data will be key in showing whether the sector will see a quick rebound,” De Lima said.
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