India's manufacturing activity contracted and touched a 28-month low of 49.1 in December 2015, down from November's 50.3, according to a business survey data released on Monday.
Nikkei's Manufacturing Purchasing Managers' index, compiled by Markit, fell below 50 for the first time since October 2013 when the PMI had fallen below the demarcating threshold of 50.
A reading below 50 implies contraction.
A combination of factors ranging from weak demand and Chennai floods during December 2015 caused the decline, according to Pollyanna De Lima, Economist at Markit, reported BusinessLine.
"Ending a 25-month sequence of growth , production plummeted in December. Such was the extent of the decline that the rate of reduction was the sharpest since financial crisis," she said.
The Chennai floods disrupted manufacturing activities of many companies located on the outskirts of the city.
"The continued depreciation of the rupee against the US dollar pushed inflation higher, with PMI price indicators pointing to stronger increases in both input prices and output charges," Lima said.
The reading could well reflect in the export data expected to be released by the government by the middle of this month. Exports declined for the 12th month in a row during November 2015 at $ 20.01 billion, 24.43% lower than $26.48 billion during November 2014 and $21.35 billion in October 2015.
Cumulative value of exports for April-November 2015 was $174.30 billion, 18.46% down from $213.77 billion in the corresponding period last year.
