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MUMBAI (Reuters) - India's manufacturing sector grew in February at its slowest pace in almost two years as the flow of new orders slowed following a string of measures to rein in inflation.

The seasonally adjusted Purchasing Managers' Index (PMI) eased to 53.6 in February, its lowest since the PMI survey started in April 2005, from 55.3 in January. The index has declined steadily since peaking at 59.3 in October.

"The sustained decline in the PMI since October is certainly a cause for concern as it indicates deceleration in the growth and earnings momentum," Abheek Barua, chief India economist at ABN AMRO Bank, said.

The PMI, compiled by British-based NTC research and sponsored by ABN AMRO Bank, tracks changes in manufacturing business conditions by polling 500 companies each month on output, orders, employment and prices.

PMI readings above 50.0 suggest business conditions are improving while readings below 50.0 show a deterioration.

The new orders index fell to 56.5 in February, also the lowest in the survey's history, from 59.7 in January. The new export orders index also slipped to its lowest in the survey's history at 51.2.

The central bank recently stepped up the pace of monetary tightening which it began more than two years ago. In February, it announced an increase in the amount of cash banks have to keep with the central bank, following a similar increase in December.

In January, the main short-term lending rate was raised by 25 basis points to 7.50 percent, its highest in nearly four years.

The February PMI showed that higher prices of raw materials like metals, chemicals and coal, pushed up the input price index to 54.2 from 52.9 in January.

Dampening demand also undermined manufacturers' pricing power. The output price index fell to its lowest in 18 months at 50.5 in February from 50.7 in January.

Analysts expect more measures from both the central bank and the government to ease price pressures, with inflation running at a two-year high and the economy expanding at its fastest pace in 18 years.

The government estimates the economy will grow 9.2 percent in the fiscal year ending in March, from 9.0 percent in 2005/06.