By Anant Vijay Kala

NEW DELHI--A gauge of manufacturing activity in India retreated from a 22-month high in November, adding to concerns about an imminent economic slowdown caused by a cash shortage in the South Asian economy.

The seasonally-adjusted India Manufacturing Purchasing Managers' Index fell to 52.3 from 54.4 in October, survey figures released by IHS Markit and Nikkei showed Thursday. A figure above 50 indicates expansion while a reading below that signals contraction.

"The sudden withdrawal of high-value bank notes in India caused problems for manufacturers, as cash shortages hampered growth of new work, buying activity and production," said Pollyanna De Lima, an economist at IHS Markit.

Thelower reading will exacerbate concerns about the health of the South Asian economy after data released Wednesday showed growth, at 7.3% in the three months ended Sept. 30, fell short of economists' expectations, prompting some analysts to slash their GDP forecasts.

India's government last month withdrew about 86% of bank notes in circulation in the economy to crackdown on tax evaders and counterfeiters. The move dried up the flow of cash, bringing economic activity to a near-standstill.

"Although many surveyed companies commented that further disruption is expected in the near-term, the demonetisation of the rupee is anticipated to ignite growth in the long-run as unregulated companies leave the market," Ms. De Lima added.

Write to Anant Vijay Kala at anant.kala@wsj.com

(END) Dow Jones Newswires

December 01, 2016 00:29 ET (05:29 GMT)

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