"Services saw a pick-up in growth, while the manufacturing sector managed to outperform expectations despite a marginal slowdown from its October final PMI reading," observed Pranjul Bhandari, chief India economist at HSBC.

HSBC's flash India Composite Purchasing Managers' Index compiled by S&P Global increased to 59.5 in November from 59.1 in October showing that economic activity is continuing to expand. The 50-level separates growth from contraction.

PMI for the services sector rose to 59.2 from 58.5 in November, which is the highest level since August. The manufacturing sector also registered an expansion during the month, but the pace of growth was marginally slower as the index declined to 57.3 from 57.5.

Overall domestic demand increased on the back of higher sales in the services industry which made up for slower growth in manufacturing. However, the demand for the country’s exports shot up during the month with overseas demand for services rising to a four-month high.

This has improved the business outlook for the next year as well, with overall optimism rising to the highest level in May which led to increased hiring by firms.

Employment generation rose at the fastest pace since the survey began in December 2005, a positive indicator of economic health and consumer spending power, according to the report.

However, rising inflation has given some cause for concern. “Price pressures are rising for raw materials used by manufacturers, as well as food and wage costs in the services sector," said Bhandari.

The RBI bulletin for November has also stated that the outlook for India’s exports is brightening as the country has been gaining a share in the global trade of key manufacturing items, according to the RBI bulletin for November.

“In fact, India currently holds 13 per cent or a sixth of the global market share in petroleum products, attesting to rising refining capabilities and ability to meet international standards,” the report states.

It also points out that private consumption is back to being the driver of domestic demand with festival spending lighting up real activity in Q3.

Retailers are reporting a pick-up in sales growth relative to the second quarter. E-two-wheelers sparkled this Diwali, although there is a distinct premiumisation that has gained further ground, as vividly evident in the luxury car segment. New cities are rising across the country with the urban population surging fourfold - by 2025, half of India’s population is expected to live in cities, boosting urban demand, according to the report.