MUMBAI (AFP) - Indian factory output eased in January to a three-month low as new business slowed down, a key survey showed Monday, suggesting more steps are needed from the government to boost growth.

Banking giant HSBC said that its purchasing managers index (PMI) fell to 52.9 points in January, down from a two-year high of 54.5 the previous month.

In the survey, which is seen as a harbinger of industrial expansion and economic health, a reading of more than 50 points suggests expansion while anything below indicates contraction.

"The slip can partly be attributed to consolidation after two months of impressive upticks. New orders, both from domestic and international sources, also continued to grow, though at a slower pace than in December," said HSBC chief India economist Pranjul Bhandari.

Bhandari hoped the Reserve Bank of India (RBI) would announce "upfront rate cuts" as growth in Asia's third-largest economy continues to be "sluggish" amid cooling inflation and falling commodity prices around the world.

India is considered especially vulnerable to oil price shocks since the country imports nearly 80 per cent of its daily needs from various parts of the globe.

HSBC expects RBI Governor Raghuram Rajan, a former chief economist at the International Monetary Fund, to cut interest rates by 75 basis points from 7.75 per cent by June this year.

The RBI has already ended its 20-month hiatus on rate cuts by announcing a surprise 25-basis point reduction early last month, citing lower inflation.