By Rahul Karunakar
BANGALORE (Reuters) - Indian manufacturing returned to growth last month as a strong rise in orders pushed factories to step up production, a business survey showed on Monday, suggesting a slow economic recovery is on its way.
An expansion in manufacturing can only boost optimism after data on Friday showed Asia's third-largest economy grew at a higher-than-expected rate in the three months through September.
The HSBC Manufacturing PMI, compiled by Markit, rose to 51.3 in November from October's 49.6.
The PMI index is the highest since March and marks its first time above the watershed level of 50 that divides growth from contraction in four months.
"Manufacturing activity picked up, led by a rise in new domestic orders, which helped pull up output growth," said Leif Eskesen, chief economist for India at survey sponsor HSBC.
Offering hope that softness in domestic demand may be leveling off, overall orders grew for the first time in six months despite demand for the country's exports easing off.
The new orders sub-index rose to 51.9 last month, its highest since April. In October it shrank to 48.9.
Such strong demand augurs well and will be welcome news for a government losing popularity ahead of an election next year because of slowing growth and stubbornly high inflation.
The survey pointed to some good news on inflation as well, bringing relief to the Reserve Bank of India, which hiked interest rates by 25 basis points at back-to-back meetings to curb rising prices, taking the policy repo rate to 7.75 percent.
Both input and output costs rose at a softer pace in November, the survey showed.
HSBC's Eskesen said the RBI would be getting closer to the end of its tightening cycle if the trend of easing inflation continues.
"Although it (RBI) may still need to notch rates up a bit further," he added.
(Editing by Clarence Fernandez)
