Indian factory activity shrank for the first time in more than four years last month, adding to the country's deepening economic malaise even as the Reserve Bank of India (RBI) struggles to defend the battered rupee currency, a survey showed.
The bleak Purchasing Managers' Index (PMI) comes hard on the heels of data on Friday that showed Asia's third-largest economy grew at it slowest quarterly rate in the three months to June since the global financial crisis, suggesting more pain ahead.
The HSBC Manufacturing PMI, compiled by Markit, sank to 48.5 in August from 50.1 in July, the lowest reading since March 2009. Economists polled by Reuters had expected a far shallower fall to 49.9.
The index, which gauges business activity in Indian factories but not utilities, had been close to the 50 mark that separates growth from contraction since May but falling orders dragged it under last month.
"Manufacturing activity contracted in August for the first time since March 2009. This was led by a decline in new orders, especially export orders," said Leif Eskesen, chief economist for India at survey sponsor HSBC.
The survey showed new export orders shrank for the first time in a year.
In a sign that domestic demand is also faltering, new orders, which include domestic orders, shrank at a faster pace. The index fell for the sixth straight month to 47.5 in August, its lowest since February 2009.
That prompted factories to cut production, with the sub-index measuring output falling to its lowest since early 2009.
Data on Friday showed the Indian economy grew 4.4 per cent in the April-June quarter, the slowest quarterly rate since Jan-March of 2009,