For the month of November, Markit India Manufacturing Purchasing Managers' Index (PMI) rose to 51.2 as against 50.6 in October.
Factory activity, measured through PMI, has remained above the 50-point threshold mark for the 28th straight month. Readings above 50 mean expansion while those below the level indicate contraction.
Despite the marginal improvement, growth of new orders and production was subdued. Further, companies reduced input buying and cut jobs for the first time in 20 months. Increase in exports has also been minimal.
This comes after India's GDP (gross domestic product) growth for the second quarter of 2019-20 was reported at a 6-year low of 4.5 percent.
"Rates of expansion in factory orders, production and exports remained far away from those recorded at the start of 2019, with subdued underlying demand largely blamed for this," said Pollyanna De Lima, principal economist at IHS Markit.
"Some level of uncertainty regarding the economy was evident by a subdued degree of business optimism. Also, companies shed jobs for the first time in over a year-and-a-half and there was another round of reduction in input buying. The weakness of these forward-looking indicators suggests that firms are bracing themselves for challenging times ahead," De Lima added.
Further, PMI data showed a lack of inflationary pressures in November, which raise expectations of another round of rate cuts by the Reserve Bank of India (RBI) at its next monetary policy review meeting scheduled between 3-5 December.