The growth of the manufacturing sector was at its lowest in 10 months in January. The reason for the slowdown is attributed to demand being cramped by the money-tightening measures introduced by the Reserve Banks of India to harness inflation.

RBI's seasonally adjusted "purchasing managers' index" (PMI) came down to 55.3 in January from 56.6 in December - the lowest since March 2006 due to slowing local and external demand.

The seasonally adjusted new orders index declined to its lowest in 10 months as rising borrowing costs dampened demand. The index fell to 59.7 in January from 61.6 in December.

The export orders index fell to its lowest since the index was introduced. It stood at 53.4 in January from 54.1 in December.

The PMI is compiled by UK-based NTC Research and sponsored by ABN AMRO Bank. It tracks changes in manufacturing business conditions, for which it polls 500 companies each month on output, orders, employment and prices.

Its ratings of above 50.0 indicate an improvement in business conditions while those below signal deterioration. Introduced in April 2005, the index reached its peak in October, declining steadily thereafter.

The survey also revealed input price inflation slowing to 52.9, its lowest since the survey began, from 55.1 in December, indicating higher margins for companies without output price inflation. The output price index declined to a 17 month low of 50.7 in January from 51.9 in December.

The survey, released this morning, was conducted before the RBI's decision yesterday to raise its main short-term lending rate by 25 basis points taking it to its to four-year peak of 7.50 per cent, in a bid to slowdown the growth in credit, currently estimated at 30 per cent and cool inflation.