The headline HSBC India Purchasing Managers' Index (PMI) -- a composite gauge designed to give a single-figure snapshot of manufacturing business conditions -- stood at 53.3 in November significantly higher from 51.6 in October.
The manufacturing sector output, improved for the 13th month in a row and reached a 21-month peak in November.
A figure above 50 indicates the sector is expanding, while a figure below that level means contraction.
"Manufacturing activity accelerated further in November led by higher output and new orders. Domestic orders saw the biggest increase, even as new export orders continued to be strong," HSBC Co-Head of Asian Economic Research Frederic Neumann said.
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In spite of accelerated expansions in output and new business, employment in the manufacturing sector remained broadly unchanged in November, the report said.
"The sharp rise in input prices was surprising, but future prints may be lower as falling commodity prices eventually lead to softer intermediate good prices. Meanwhile, the pick-up in output prices could partly be signalling some revival in pricing power among businesses," Neumann said.
A cautionary note was, however, provided by the HSBC survey regarding input costs and output charges, as inflationary pressures intensified during the month following three consecutive months of easing.
The RBI, which has maintained the interest at elevated level for the past 10 months, is scheduled to announce it policy review tomorrow.
According to official figure, wholesale inflation came down to a five-year low at 1.77 per cent in October while retail inflation hit a record low of 5.52 per cent in the same month.
Meanwhile, the country's economic growth fell to 5.3 per cent in the second quarter from 5.7 per cent rate in the first three-month period ended June, raising the clamour for rate cut by the RBI tomorrow.