India Index Signals First Manufacturing Contraction Since 2013

  • Index falls below 50 for first time since October 2013
  • New orders slump; gauge of input and output prices rise

A closely watched index signaled a contraction in Indian manufacturing for the first time in more than two years, showing weakness in the economy even as headline growth numbers are among the fastest in the world. 

The Nikkei and Markit Economics Index fell to 49.1 in December, the lowest since August 2013, data showed Monday. A reading above 50 signals expansion while anything below that indicates a contraction. A similar gauge for crucial services growth is due on Wednesday.

The data underscores Prime Minister Narendra Modi’s struggle to boost private investment in the face of legislative logjams, choked credit lines and weakened global prospects due to China’s slowdown. Government spending has underpinned India’s growth, which the Finance Ministry forecasts at 7 percent to 7.5 percent in the year through March.  

“This clearly shows that people are not expecting a quick recovery," said Tirthankar Patnaik, a Mumbai-based economist at Mizuho Bank Ltd.

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