Factory output in India hit a 2-year high for the month of December 2014 as output expanded at a fast pace, data from HSBC India Purchasing Manager's Index showed.

Latest data also painted a brighter picture in terms of prices, as inflationary pressures eased during the month.

Adjusted for seasonal factors, the headline HSBC India Purchasing Managers' Index (PMI) - a composite indicator designed to give an accurate overview of manufacturing operating conditions - climbed to a two - year high of 54.5 in December, up from 53.3 in the prior month.

Output in the Indian manufacturing sector rose in line with the headline index in December, with growth picking up to the quickest in two years. According to a number of survey participants, the latest rise in production was supported by stronger order books.

Consumer goods was the best performing of the broad sectors monitored. Latest data reflected reports of improving demand in December, as new orders increased for the fourteenth consecutive month. Moreover, the rate of expansion was marked overall and the fastest since the end of 2012.

Similarly, Indian manufacturing companies registered a further rise in new export business in December. New work from abroad expanded at the quickest pace since April 2011.

Reflective of further growth of output and new orders, input buying among Indian goods producers increased in December. The rate of expansion accelerated to the most marked in the current 14 month sequence of growth.

Subsequently, the pace of pre-production inventory building picked up to the sharpest in more than two years.

Furthermore, stocks of finished goods held by Indian manufacturers rose at the fastest rate since the survey began in April 2005.

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