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       Manufacturing slips into contraction on cash crunch: PMI data
 
         Posted on :16:37:30 Jan 2, 2017
   
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       Last edited on:16:37:30 Jan 2, 2017
         Tags: Manufacturing slips, cash crunch, PMI data
 
NEW DELHI: Hit hard by the demonetisation move, manufacturing sector plunged into contraction in December -- the first shrinkage in a year -- as cash crunch took its toll on new business orders and factory output, a monthly survey showed today.
 
The Nikkei Markit India Manufacturing Purchasing Managers' Index (PMI) -- which measures manufacturing sector activity -- fell to 49.6, down from 52.3 in November.
 
The index slipped below the crucial 50 threshold -- which separates contraction from expansion -- for the first time since December 2015. This also marked the biggest month-on- month decline in the index in over eight years or since November 2008 when the global economy had slipped into a severe downturn post Lehman collapse.
 
"Having held its ground in November, following the unexpected withdrawal of Rs 500 and 1,000 bank notes from circulation, India's manufacturing industry slid into contraction at the end of 2016," said Pollyanna De Lima, Economist at IHS Markit and author of the report.
 
Lima added that "cash flow issues among firms also led to reductions in purchasing activity and employment".
 
Survey participants widely blamed the withdrawal of high-value rupee notes for the downturn as cash shortage in the economy reportedly resulted in fewer levels of new orders.
 
Businesses also highlighted challenging conditions in external markets, with a fall in new businesses from abroad ending a six-month long growth.
 
Though December saw a mild decline in manufacturing output, the average reading for October-December remained in the "growth terrain", suggesting a positive contribution from the sector to overall GDP in the third quarter of 2016-17, the survey said.
 
Several researchers and economists have lowered their near-term GDP growth forecasts in the wake of the demonetisation move, though there is a broader view that the decision would help the economy grow faster in longer run.
 
"With the window for exchanging notes having closed at the end of December, January data will be key in showing whether the sector will see a quick rebound," Lima added.
 
The report said the higher prices paid for a range of raw materials made average cost burden increase for the 15th straight month in December, with the rate of inflation picking up since November.
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       BUSINESS
Next Article: Sensex begins 2017 on negative note, down 132 points
 
 
BUSINESS HEADLINES
NCAER lowers GDP growth forecast to 6.9 pc for FY17  
Demonetisation sucked in cash like vacuum cleaner:IMF official  
Infosys seeks shareholder nod to amend Articles of Association  
Note ban impact on loan, deposit growth significant: Moody's  
Bharti Airtel to acquire Telenor India  
India's GDP projected to slow to 6.6% post-demonetisation: IMF  
Snapdeal to cut 600 jobs; CEO admits 'mistake' in biz plan  
Snapdeal founders take 100% salary cut  
Tatas to lead, not follow: Chandrasekaran  
Will sustain TCS' growth momentum, says CEO Gopinathan  
'Slowdown spill over to January-March quarter'  
Microsoft-Flikpkart announce strategic tie-up  
EU asks India to extend by 6 months trade pact with EU nations  
Licensing for payment sector can't be tick-box exercise: Gandhi  
TRAI seeks views on promotional offers, predatory pricing  
Note ban impacts PepsiCo's India biz: Nooyi  
EPFO extends deadline for submitting Aadhaar till Mar 31  
TCS to look at buyback on Feb 20  
Sensex near five-month highs, Nifty reclaims 8,800-mark  
India's GDP to expand post demonetisation: Meghwal  
India's GDP to expand post demonetisation: Meghwal  
Air India inducts A320 neo plane, to add 13 more this year  
Sensex bounces 146 pts; IT, pharma lead rally  
India, UAE trade to hit USD 100 billion by 2020: CII  
E-commerce expected to touch USD 50-55 billion by 2021: Study  
 
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