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India manufacturing activity skids to 50-month low

India's manufacturing activity skidded to a 50-month low in May


India's manufacturing activity skidded to a 50-month low in May, a widely watched survey showed on Monday, fuelling concerns about Asia's third largest economy.

The numbers were grim reading for the Congress government which hopes for an economic upturn before elections due by next May. It followed data last Friday showing growth of five percent in the 2012-2013 financial year, the weakest in a decade.

"The current (economic) quarter is shaping up to be weak,"said CLSA economist Rajeev Malik.

The overall Purchasing Managers' Index (PMI) from HSBC, which gives a snapshot of manufacturing health from output to jobs, fell to 50.1 in May from 51.0 in the previous month as domestic orders tailed off.

The May PMI finding, based on data from manufacturing firms, was the lowest since a below-50 reading in March 2009.

The narrower factory output index also slumped to a 50-month low, hitting 48.6 in May from 50.2 in April and crossing the crucial divide from expansion to contraction.

A reading of over 50 spells expansion of activity while one below 50 indicates shrinking.

"With growth moderate and inflation easing, the Reserve Bank of India may fire another salvo" at its June 17 meeting and cut its leading lending rate for a fourth time since the start of the year, said HSBC economist Leif Eskesen.

During the second quarter in April and May, the PMI reading has averaged 50.6, down from 53.1 in the previous quarter.