India’s manufacturing Contracts for a Second Month

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Jan. 28 – Following a cut in global capital flows and a drop in orders Indian manufacturing activity contracted in December, marking the second month of declining manufacturing activity. The ABN AMRO Bank purchasing managers' index (PMI), based on a survey of 500 companies, fell to a seasonally adjusted 44.4 in December, falling for the fourth consecutive month to its lowest in more than three and a half years. A reading below 50 signals economic contraction.

The Indian government has taken several steps to prop up the manufacturing sector which constitutes about 16 percent of India’s GDP. However ABN Amro economists feel that the current slump in manufacturing will persist for a few months, until the benefits from the measures take time to filter through.

"Until such time, the manufacturing sector will have to cope with contracting demand, especially on the exports front and stalling investment activity," Gaurav Kapur, senior economist at ABN AMRO Bank N.Vm told Reuters.

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