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India’s manufacturing sector growth surged in the month of October, fuelled by strong domestic demand, GST 2.0 reforms, productivity gains and increased technology investments, a report said on Monday. 

The HSBC India Manufacturing Purchasing Managers' Index (PMI) rose to 59.2 in October from 57.7 in September, according to data compiled by US-based financial intelligence provider S&P Global.

The increase stemmed from quicker growth in new orders and factory output at the beginning of the third financial quarter, driven by boost in advertising and recent GST reforms, the report said.

The expansion rate matched levels seen in August, which was one of the strongest in the last five years, it indicated.

A reading above 50 indicates economic expansion, while one below 50 shows contraction in the manufacturing, services, or construction sectors. A reading of exactly 50 signifies flat activity.

The manufacturing PMI acceleration comes from robust end-demand fuelled expansions in output, new orders, and job creation, said Pranjul Bhandari, chief India economist at HSBC.

Meanwhile, input prices moderated in October while average selling prices increased as some manufacturers passed on additional cost burdens to end-consumers, Bhandari added.

Despite input cost inflation easing to an eight-month low, output charge inflation remained at its highest level in 12 years for the second consecutive month.

Companies reported passing on higher freight and labour costs to customers, while strong demand allowed them to maintain elevated prices.

Domestic sales growth outpaced export orders, which grew more slowly even with some improvement in overseas demand. Employment creation continued for the twentieth straight month in October, with hiring remaining moderate and largely consistent with September's levels, it noted.

Manufacturers remain optimistic about future business conditions, crediting their optimism to GST reforms, capacity expansion, and stronger marketing efforts, the report noted.