India’s manufacturing sector recorded a modest recovery in January, supported by a quicker rise in new orders, even as overall business confidence fell to its lowest level in nearly three-and-a-half years, according to a monthly survey released on Monday.

The seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index (PMI) edged up to 55.4 in January from a two-year low of 55 in December, indicating a gradual improvement in operating conditions.

In PMI terms, a reading above 50 signals expansion in activity, while a figure below 50 points to contraction. Despite the uptick in output and demand, softer sentiment among firms suggests cautious outlook amid broader economic uncertainties.