India's manufacturing sector output increased at a sharp pace in June as new business continued to flow in amid favourable demand conditions and resulted in record upturn in employment, a monthly survey said on Monday.

The seasonally adjusted HSBC India Manufacturing Purchasing Managers' Index (PMI) increased from 57.5 in May to 58.3 in June, indicating a sharper improvement in business conditions.

In PMI parlance, a print above 50 means expansion, while a score below 50 denotes contraction.

June data showed that the stronger expansion in sales at manufacturers in India was largely due to buoyant underlying demand, higher export volumes and successful advertising.

As a consequence of ongoing increases in new order intakes, firms stepped up recruitment. The rate of job creation was sharp and the strongest seen since data collection started in March 2005.

"... Firms increased their hiring at the fastest pace in over 19 years. Input buying activity also rose during the month," said Maitreyi Das, Global Economist at HSBC.

Staff expenses reportedly intensified in June, which coupled with rising material and transportation costs caused another overall increase in operating expenses, the survey said.

Manufacturers in India were able to share additional cost burdens with their clients amid conducive demand conditions. Selling charges were raised to the greatest extent in over two years.

"On the price front, input costs moderated slightly in June, but remained at elevated levels. Manufacturers were able to pass on higher costs to customers, as demand remained robust, resulting in improved margin," Das said.

Meanwhile, new export orders increased substantially in June. Companies attributed higher inflows of new work from overseas to better demand from Asia, Australia, Brazil, Canada, Europe and the US.

The survey noted that the outlook for the manufacturing sector remained positive, with nearly 29 per cent of panellists expecting output growth over the coming year.

Firms forecast further improvements in demand and order book volumes in the year ahead, with advertising and greater client enquiries also underpinning optimism, the survey said.

The HSBC India Manufacturing PMI® is compiled by S&P Global from responses to questionnaires sent to purchasing managers in a panel of around 400 manufacturers.

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