As HSBC survey today said that the manufacturing sector of India expanded at the strongest pace in January in the past 10 months, adding that the growth was largely driven by upsurge in export and domestic orders.

In January, the HSBC India Manufacturing Purchasing Managers' Index (PMI) - a measure of factory production - stood at 51.4, up from 50.7 in December. This is the highest reading of the PMI since March 2013.

"Manufacturing activity moved into higher gear led my faster growth in new orders," HSBC Chief Economist for India & ASEAN Leif Eskesen said.

According to HSBC, new orders expanded in January due to increase in demand from both domestic as well as overseas clients.

The survey also found that the employment rate jumped for the fourth month in a row January as jobs were created in all three broad areas of the manufacturing segment.

The report said that he average input costs rose in January and the companies followed suit by raising their output costs.

"Inflation pressures also firmed, suggesting that the RBI has to keep up its inflation guards," Eskesen said.

It may be recalled that the key policy rate was raised by 0.25 percent to 8 percent by Reserve Bank Governor Raghuram Rajan in the third quarter review of monetary policy of the central bank in order to check inflation.

Retail or CPI inflation came down to a three-month low of 9.87 percent in December, while the wholesale or WPI was recorded at 6.16 percent during the month, the lowest in the last five months