The March PMI data pointed to an improvement in overall operating conditions for the 21st straight month. In PMI parlance, a print above 50 means expansion while a score below 50 indicates contraction.
"Underlying demand for Indian goods remained strong in March, underscored by the quickest upturn in factory orders for three months. Hence, production continued to expand at a robust clip and firms stepped up their stock building efforts," said Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence.
According to the survey, input cost inflation retreated to its second-lowest mark in two-and-a-half years in March as pressure on supply chains subsided and the availability of raw materials improved.
Subsequently, goods producers concentrated on rebuilding their stocks. Robust increases in buying levels in recent months supported a near-record accumulation of input inventories in March.
On the prices front, close to 96 per cent firms signalled no change in cost burdens since February.
"Although selling prices increased further at the end of the last fiscal quarter, the rate of inflation was moderate and broadly similar to February. Several panellists reportedly left their fees unchanged amid efforts to boost sales," Lima said.
On the jobs front, goods producers kept payroll numbers broadly unchanged in March, as outstanding business volumes rose at a marginal rate that was the weakest in a year.
"Companies reported abundant capacity among themselves and their suppliers. Pending workloads expanded only marginally in March, hindering job creation," Lima said.
Going ahead, Indian manufacturers expect improved customer relations, new product releases and advertising to support sales and subsequently production over the course of the coming 12 months.
"Although manufacturers were upbeat towards future new orders, they somewhat doubted that inflation would continue to recede. Such worries restricted optimism towards output prospects," Lima said.
The Monetary Policy Committee (MPC) of the Reserve Bank will be meeting for three days on April 3, 5 and 6 and on Thursday will come out with the first bi-monthly monetary policy for fiscal 2023-24.
The Reserve Bank of India (RBI) has already increased the repo rate by a total of 250 basis points since May in a bid to contain inflation though it has continued to remain above the central bank's comfort zone of 6 per cent for most of the time.
The Consumer Price Index (CPI)-based inflation was 6.52 per cent in January and 6.44 per cent in February.