Indian factory output grew in October for the 12th consecutive month thanks to an increase in export orders, a key HSBC survey showed Monday.
The British banking giant said its purchasing managers index (PMI) rose to 51.6 points from nine-month low of 51.0 hit in the previous month.
In the survey, which is seen as a harbinger of industrial expansion and economic health, a reading of more than 50 points suggests expansion while anything below indicates contraction.
"Manufacturing activity picked up modestly amid stronger output and new order flows, particularly from overseas clients," said Frederic Neumann, co-head of Asian economic research at HSBC.
"However, firms continued to trim purchases and refrained from aggressive inventory accumulation."
Neumann attributed the growth to strong annual rains, falling commodity prices and the rising pace of economic reform under India's new government.
New Prime Minister Narendra Modi has unleashed a slew of reforms since his party won a landslide election victory in May, scrapping fuel subsidies, simplifying labour rules and pledging to open coal mining to private players.
Neumann said the growth in output had allowed manufacturers to raise their prices, adding that a long-expected cut in India's interest rates was unlikely in the short term.
India's consumer price inflation unexpectedly slid to three-year low of 6.46 percent in September.
But Reserve Bank of India (RBI) chief Raghuram Rajan has indicated he wants "break the back of inflation", a persistent problem in India, before cutting rates.
"If the pace of reforms stalls, or supply improvements lag demand growth, price pressures will move up again, and importantly in an environment where firms have pricing power," Neumann said.
"The RBI is, therefore, more likely to look beyond the near term dip in headline inflation."