New Delhi: In the first contraction in over two years, manufacturing sector output dipped in December to a 28-month low as new orders fell sharply and production took a big hit from heavy rains in Chennai, putting pressure on RBI to keep rates low.
Painting an even gloomier picture, the monthly PMI (Purchasing Managers' Index) survey showed that the rate of contraction was sharpest in almost seven years since the global financial crisis.
- The Nikkei India Manufacturing PMI dipped from 50.3 in November to 49.1 in December.
- The PMI has slipped below the crucial level of 50 for the first time since October 2013.
- December's incessant rainfall in Chennai impacted heavily the manufacturing sector, with lower orders leading companies to scale back output at the sharpest pace since February 2009.
- On the price front, the survey said inflation rates of both input costs and output charges were at seven month highs.
- The central bank is scheduled to hold its next monetary policy review next month.
The weakening manufacturing sector can further hurt economic recovery, as the government has already lowered its economic growth forecast for 2015-16 to 7-7.5 percent from 8.1-8.5 percent.
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