Manufacturing sector growth climbed to a four-month high in January as a sharper upturn in new orders boosted output growth amid mild cost inflation, a monthly survey said on Thursday.

The seasonally adjusted HSBC India Manufacturing Purchasing Managers' Index (PMI) recovered from an 18-month low of 54.9 in December to 56.5 in January.

The latest reading highlights the strongest improvement in the health of the sector since last September.

In Purchasing Managers' Index (PMI) parlance, a print above 50 means expansion, while a score below 50 denotes contraction.

"India's final manufacturing PMI showed that manufacturing activity accelerated in January. Current output expanded on robust demand, with domestic orders growing at a faster pace than export orders," Ines Lam, Economist at HSBC, said.

Lam further added that "the input price index inched up, but manufacturers passed on some of the cost pressures to consumers, as suggested by the small rise in the output price index."

According to the survey, new orders placed with Indian goods producers rose at a sharp pace in January, and one that was the strongest in four months. Growth was reportedly boosted by marketing efforts and demand buoyancy.

International sales also expanded at a quicker pace. Goods producers reported stronger demand from clients spread across Africa, Asia, Australia, Europe, West Asia and the Americas.

"Collectively, the rate of expansion in international orders was the fastest since last October," the report said.

Goods producers collectively recorded the fastest increase in outstanding business volumes in 15 months, with demand strength reportedly exerting pressure on capacities.

Nevertheless, the vast majority of survey participants opted to keep payroll numbers unchanged in January.

Companies scaled up input purchasing and became even more optimistic towards the year-ahead outlook for output.

"New product enquiries and diversification, alongside demand strength and publicity, boosted business confidence in January. Panellists were at their most upbeat towards the year-ahead outlook for output in 13 months," the survey said.

The HSBC India Manufacturing PMI is compiled by S&P Global from responses to questionnaires sent to purchasing managers in a panel of around 400 manufacturers.