According to the Markit Purchasing Managers? Index (PMI) activity increased by 55.7 in May from last April's 53.3. The information is taken from a survey of 500 companies.

The improving figures come from the new orders index, which climbed to 59.1 from 54.9 in April.

Last December, the PMI reached a trough of 44.4 and has slowly but steadily risen ever since. ?Data show that the sector is currently being carried by robust domestic demand, as export sales continued to fall,? Markit economist Gemma Wallace told Reuters.

Wallace added that although domestic demand improved, the pricing power of manufacturers was hurt by intense competition, while higher commodity prices also pushed up input prices.

India's economy has been improving better than expected, growing by 5.8 percent compared to the previous year during January to March. In the last three years, the Indian economy expanded by an average of 9.4 percent and the central bank forecasts its expansion by about 6 percent for the current year period ending in March 2010.