The seasonally adjusted Purchasing Managers' Index (PMI) - a composite indicator created to provide a single-figure snapshot of operating conditions in the manufacturing economy - registered 51.6 in August, up from 51.1 in July to signal an improvement in overall operating conditions.
As production grew, manufacturers increased purchasing activity at a rate that hit a nine-year high.
The Markit/ADACI Purchasing Managers Index (PMI) rose to 56.3 in August from 55.1 the month before, moving further above the 50 mark that separates growth from contraction and registering its highest reading since February 2011.
"August's PMI results showed that manufacturers in India recovered quickly from the sharp slump that followed the introduction of the Goods & Services Tax", said Pollyanna De Lima, Principal Economist at IHS Markit and the author of the report.
A stronger manufacturing sector also led to more jobs, with the rate of increase in employment the fastest since June 2014.
A subdued economic outlook pushed the Reserve Bank of India to cut its interest rates by 25 basis points in August, but the central bank maintained its neutral stance and said inflation data would drive its future policy moves.More news: Real-Life Killer Tomatoes? Carnivorous Plants May Be All Around Us - 80beats: 80beats
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The domestic market was the prime source of new contract wins, while the trend in new export business also remained robust.
United Kingdom manufacturing activity surprised to the upside in August as business confidence picked up. Business conditions improved across the three main subsectors - consumer, intermediate and investment goods - and at smaller and large-scale producers alike.
The composite indicator of manufacturing performance rose to 49.9 in August, up from 49.1 in July.
"The key question is whether this positive start to the second half of the year can be sustained", said Rob Dobson, director at IHS Markit.
According to the Markit survey, purchase price inflation accelerated for the first time in seven months during August, with over a third of companies reporting rising purchase prices.