A figure above 50 indicates the sector is expanding, while a figure below that level means contraction.
India's manufacturing sector grew at its fastest pace in two years in December, ending 2014 on a high note on strong orders flows, including from abroad, an HSBC survey said on Friday.
The headline HSBC India Purchasing Managers' Index -- a composite gauge designed to give a single-figure snapshot of manufacturing business conditions -- stood at 54.5 in December, up from 53.3 in the prior month.
The manufacturing sector output, improved for the 14th month in a row and reached a two-year peak in December.
A figure above 50 indicates the sector is expanding, while a figure below that level means contraction.
"Manufacturing activity momentum accelerated to a two-year high in December, led by a healthy increase in new orders from both at home and from abroad," HSBC Chief India Economist Pranjul Bhandari said.
The accelerated growth of the manufacturing sector was reflected by faster expansions in output, new business and foreign orders.
Manufacturing companies registered a further rise in new export business in December and new work from abroad expanded at the quickest pace since April 2011.
Meanwhile, contrasting with continued growth of production and incoming new work, staffing levels in India’s manufacturing economy declined in December.
The latest data also indicated towards a brighter picture in terms of prices, as inflationary pressures eased during the month.
"In line with falling commodity prices over the last few months, input price inflation was modest, and this trend was also mirrored in output prices," HSBC said.
On the Reserve Bank's monetary policy stance, Bhandari said, "With the disinflationary trend gaining ground, the RBI is expected to find space for some rate cuts in 2015."
RBI Governor Raghuram Rajan in the monetary policy review meet in December, 2014, had kept interest rate unchanged, saying that a shift in stance is 'premature' but hinted that a cut may come early next year if inflation continues to ease and government acts on the fiscal side.
Accordingly, the repo rate continues to be at 8 per cent while the cash reserve ratio has also been retained at 4 per cent.
