By Anant Vijay Kala

NEW DELHI--A gauge of manufacturing activity in India contracted for the first time in an year in December as a cash shortage in the South Asian economy hurt new orders, a survey showed.

The seasonally-adjusted India Manufacturing Purchasing Managers' Index fell to 49.6 from 52.3 in November, survey figures released by IHS Markit and Nikkei showed Monday. A figure above 50 indicates expansion while a reading below that signals contraction.

"Shortages of money in the economy steered output and new orders in the wrong direction, thereby interrupting a continuous sequence of growth that had been seen throughout 2016," said Pollyanna De Lima, an economist at IHS Markit.

The lower reading coulddeepen concerns that a slowdown in Asia's third-largest economy triggered by the government's move in November to withdraw overnight 86% of bank notes in circulation may last longer than expected.

The move dried up the flow of cash, bringing business activity to a grinding halt.

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

(END) Dow Jones Newswires

January 02, 2017 00:25 ET (05:25 GMT)

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