The main factor boosting production was a sustained rise in new work inflows.
The country's manufacturing sector activity improved in July as new work orders and output strengthened slightly from the previous month, leading to moderate increase in employment, a monthly survey said on Thursday.
The IHS Markit India Manufacturing Purchasing Managers Index, rose to 52.5 in July from 52.1 in June as companies scaled up production in response to a quicker upturn in factory orders.
This is the 24rd consecutive month that the manufacturing PMI has remained above the 50-point mark.
In PMI parlance, a print above 50 means expansion, while a score below that denotes contraction.
"Following a slowdown in growth in the opening quarter of fiscal year 2019/2020, some momentum was regained in July.
“Measures for factory orders, production and employment improved in the latest month, although rates of expansion remained below trend," said Pollyanna de Lima, principal economist at IHS Markit.
As per the survey, the main factor boosting production was a sustained rise in new work inflows.
"Survey participants linked the uptick in growth to a pick-up in demand, mostly stemming from successful marketing efforts, competitive pricing and favourable public policies," Lima added.
Lima further noted that domestic market provided the main impetus to sales growth, while external sales rose moderately since April 2018, as factories took a hit from subdued global trade flows.
On the prices front, the survey said the overall rate of inflation was at a three-month low and well below its long-run average.
"The relatively negligible increases in input costs and output charges, signalled by the PMI survey in July, suggest that we will likely see a further reduction in India's benchmark interest rate as the RBI continues its effort to support economic growth," Lima said.
The next Monetary Policy Committee meeting of the Reserve Bank of India (RBI) will begin on August 5.
In the June review meeting, the RBI had cut key lending rates by 0.25 per cent for the third time this year to spur economic growth.
Photograph: Rupak De Chowdhuri/Reuters