India's manufacturing sector activity witnessed an expansion in November for the first time since July, driven by rising new domestic orders, an HSBC survey said on Monday.
The HSBC India Manufacturing Purchasing Managers' Index (PMI) for the manufacturing industry climbed from 49.6 in October to 51.3 in November on the back of a rebound in new orders and output.
This was the first manufacturing PMI reading above 50.0 since July and is the highest in seven months.
The PMI reading of above 50 differentiates growth from contraction.
"Manufacturing activity picked up, led by a rise in new domestic orders which helped pull up output growth," HSBC chief economist for India and ASEAN Leif Eskesen said.
Meanwhile, according to official data released last Friday, the second quarter GDP figure is also an indication of an economic recovery.
After sluggish growth in the first quarter, the Indian economy grew by 4.8% in the second quarter this fiscal due to improved performance of farm, manufacturing, construction and services sectors.
HSBC further noted that manufacturing production rose for the first time in seven months during November. Moreover, the rise in new work intakes ended a five-month period of contraction.
Meanwhile, export business increased at a marginal and slower rate, suggesting that the domestic market was the main source of new order gains.
According to HSBC, inflationary pressures in the Indian manufacturing economy softened in November.
"Encouragingly, input and output price inflation eased, which, if sustained, could imply that the RBI is getting closer to the end of its tightening cycle, although it may still need to notch rates up a bit further," Eskesen said.
The Reserve Bank had hiked policy interest rates by 0.25% each in September and October to bring down the stubbornly high inflation.
The Wholesale Price Index (WPI) based inflation stood at 8-month high of 7% in October, while the retail inflation, based on Consumer Price Index (CPI), swelled to 10.09% during the month, mainly on account of high food prices.