The S&P Global India Manufacturing Purchasing Managers' Index (PMI) declined marginally in May to 54.6 from 54.7 a month back.
A reading above 50 indicates expansion in activity, while a sub-50 print is a sign of contraction.
According to S&P Global, the 11th consecutive 50+ print for the manufacturing PMI "pointed to a sustained recovery" and was "consistent with a solid improvement in operating conditions".
"Demand showed signs of resilience in May, improving further in spite of another uptick in selling prices. Companies reported a marked increase in total new orders that was broadly similar to April," S&P Global noted.
Within new orders, May saw international orders rise the most in 11 years
The continued rise in new orders helped increase manufacturing sector jobs in May. Although the rise in manufacturing employment was only slight, S&P Global said the rate of employment growth rose to the most since January 2020.
Holding back a more robust increase in employment was only mild pressure on manufacturers' capacities.
While the situation looked firm on the output side, price pressures continued to build on top of already elevated levels.
Manufactuerers' input prices rose again in May, although the rate of increase was lower than seen in April. However, this was the 22nd month in a row that costs had risen.
These cost burdens continued to be shared with consumers, with selling prices being raised by the most in over eight-and-a-half years - consistent with Consumer Price Index (CPI) inflation hitting a near-eight-year high of 7.79 percent in April.
"While firms appear to be focusing on the now, the survey's gauge of business optimism shows a sense of unease among manufacturers. The overall level of sentiment was the second-lowest seen for two years, with panellists generally expecting growth prospects to be harmed by acute price pressures," noted Pollyanna De Lima, economics associate director at S&P Global Market Intelligence.