Manufacturing growth cools to 22-month low in October

BENGALURU (Reuters) - Growth in India's manufacturing sector cooled to its slowest in 22 months in October as domestic demand softened, a private survey showed on Monday, adding pressure on Prime Minister Narendra Modi to usher in long-promised reforms.

The Nikkei Manufacturing Purchasing Managers' Index, compiled by Markit, fell to 50.7 in October from September's 51.2. The 50-mark divides expansion from contraction.

A sub-index covering new orders dropped to a two-year low of 51.2 from 52.5 as the uncertain economic climate deterred clients from committing to new projects, Markit said. New export orders grew slightly faster than September but at a modest pace, and levels were still well below those in late summer.

To try and spur demand, the Reserve Bank of India cut interest rates to a 4-1/2 year low of 6.75 percent in September in a larger than expected move. A Reuters poll had forecast a 25 basis point (bps) reduction to 7.00 percent.

The central bank has cut interest rates by 125 bps since January, but as input prices rebounded in October the RBI will likely remain on the sidelines for the remainder of the year watching for any signs of a pick-up in inflation.

"The RBI may pause its loosening cycle for the rest of the year. Upcoming survey data will show how effective the central bank's effort to revive the economy has been," Pollyanna De Lima, an economist at Markit said.

With the RBI likely to hold fire, pressure has mounted on Modi, who has promised to fast-track stalled infrastructure projects and ease restrictions on firms to bolster growth.

Still, showing some signs of optimism, firms added workers last month for the first time since January, though the increase was marginal.

(Reporting by Anu Bararia; Editing by Kim Coghill)