The HSBC Manufacturing Purchasing Managers' Index (PMI) for India rose to 51.4 in January, its highest since March, as against 50.7 in the previous month.
The index, which is a measure of business activity in Indian factories apart from utilities, stood below the 50 mark that separates growth from contraction, for three months, before it rose above it in November.
With domestic and overseas orders rising, the Indian manufacturing sector started the new year on high note, according to a survey that also showed inflation had accelerated, according to a Reuters report.
A steady economic recovery in the country's major export destinations of the US and the euro zone in the past few months saw orders flow in at an increased pace.
Though orders faltered late last year, the new orders sub-index was up at 52.4 last month from 51.3 in December even as the pace of incoming export orders for the second straight month picked up, prompting firms to ratchet up output last month.
Markets in China, the world's biggest buyer of bullion, would remain closed until Friday for the Lunar New Year holiday, with Hong Kong, a major trading hub, remaining shut today.
According to traders, until China came back, the focus during Asian hours would be on any developments in the emerging markets, where the US economic growth and the Federal Reserve's move to taper stimulus had led to capital outflows.
"The uncertainty over a global economic recovery, despite the obvious uptick in the U.S. economic outlook, remains to be the missing jigsaw puzzle piece in determining gold price trend in 2014," OCBC analysts said in a note.
They said more trouble in emerging markets could increase the appeal of gold as a safe haven.
"In addition, the surprise surge in Chinese gold demand, should it persist, may provide support for gold at least at its $1,200 per ounce handle at this juncture."