"The Indian manufacturing sector ended 2013 on an encouraging footing. Operating conditions improved for the second successive month in December, as both output and new orders increased. Consequently, firms raised their workforce numbers further in the latest month.

Down slightly from 51.3 in November to 50.7 in December, the seasonally adjusted HSBC India Manufacturing Purchasing Managers' Index^TM (PMI^TM) signalled a second consecutive monthly improvement in business conditions. Although weaker than its long-run trend, the PMI average for the final quarter of the year (50.5) was greater than that seen for Q3 (49.4)," a release by Markit for the HSBC India Manufacturing PMI said.

According to Leif Eskesen, Chief Economist for India & ASEAN at HSBC, "Manufacturing activity decelerated slightly in December as a slowdown in domestic order flows led to slower output growth. By sector, however, the consumer goods segment held up. Despite the deceleration in order flows, backlogs of work picked up due to raw material shortages and power outages. Inflation gauges were broadly steady, although they declined marginally. Today's numbers show that growth remains moderate and struggles to take off due to lingering structural constraints. Even so, inflation pressures remain firm and are proving sticky. RBI may yet again have to flex its muscles and tighten monetary policy to bring down the elevated level of inflation."

Price indicators moved lower in December. Average purchasing costs increased at the slowest pace for four months, but the overall rate of inflation remained robust. Most of the increase was attributed by surveyed companies to higher prices paid for raw materials such as metals, chemicals and textiles. Output prices rose for the seventh month in a row, although competition between manufacturers meant that the rate of increase was historically muted.

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