Aided by a strong increase in domestic demand and production, the manufacturing activity for the month of January showed a rise according to a private survey.
The Nikkei Manufacturing Purchasing Managers' Index (PMI), that is compiled on a monthly basis by IHS Markit, rose to 53.9 in January 2019 from 53.2 in the month before.
The above the 50-mark in the index, that separates growth from contraction, has been maintained for an eighteenth straight month, becoming the longest stretch of expansion since November 2015.
Production was raised by the manufacturers at the fastest pace in 13 months. Orders also rose at the quickest rate since December 2017, primarily due to robust domestic demand. On the other hand, growth of export orders slowed for a second month.
"The manufacturing industry in January made up for ground lost at the end of 2018, with new business and production expanding at rates not seen for over a year," IHS Markit said. "confidence in market conditions were shown by a rebound in business sentiment, which reached a five-month high."
Relaxed inflationary pressure over the previous few months enabled firms to transfer some of their cost burden from slight rise in input price inflation to customers.
Experts believe that it should help keep the retail inflation below the Reserve Bank of India's medium-term target of 4 percent. In December, it dropped to an 18-month low of 2.19 percent. The central bank is expected to change its stance from "calibrated tightening" to "neutral" at its policy meeting on 7 February and cut interest rates in June according to economists polled by Reuters in January.