India's manufacturing sector experienced a notable upswing in January, reaching a four-month high, driven by a more pronounced increase in new orders, according to a monthly survey released on Thursday. The HSBC India Manufacturing Purchasing Managers' Index (PMI), adjusted for seasonal variations, rebounded from December's 18-month low of 54.9 to 56.5 in January.

In PMI terminology, a reading above 50 indicates expansion, while a score below 50 signifies contraction. Ines Lam, an Economist at HSBC, highlighted that the final manufacturing PMI for India revealed an acceleration in manufacturing activity in January. The expansion in current output was attributed to robust domestic demand outpacing export orders.

Lam noted that while the input price index saw a slight increase, manufacturers managed to pass on some of the cost pressures to consumers, evident in the modest rise in the output price index. The survey indicated a substantial rise in new orders for Indian goods producers in January, the strongest in four months, propelled by marketing efforts and buoyant demand.

International sales also grew at an accelerated pace, with stronger demand reported from various regions, including Africa, Asia, Australia, Europe, the Middle East, and the Americas. The report highlighted that the collective expansion rate in international orders was the fastest since October of the previous year.

Goods producers recorded the swiftest increase in outstanding business volumes in 15 months, reflecting demand strength exerting pressure on their capacities. Despite this, most survey participants opted to maintain payroll numbers unchanged in January. Companies increased input purchasing and displayed heightened optimism about the year-ahead outlook for output.

The survey emphasized that business confidence in January was bolstered by new product inquiries, diversification, demand strength, and publicity. Panelists expressed their highest level of optimism regarding the year-ahead outlook for output in 13 months. Compiled by S&P Global, the HSBC India Manufacturing PMI is based on responses from purchasing managers in a panel of around 400 manufacturers.