The IHS Markit India Manufacturing Purchasing Managers' Index (PMI), showed an index reading of 51.4 in September 2019, which was unchanged from August and "thereby posting its joint-lowest reading since May 2018".
An index reading of above 50 indicates an overall increase in economic activity, or growth, and below 50, an overall decrease.
The survey indicated subdued demand conditions domestically and externally, which led to limited production, lower inventories and reduced input buying.
At the same time, business confidence sank to one of the lowest levels seen in over two-and-a-half years.
Commenting on the latest survey results, Pollyanna de Lima, Principal Economist at IHS Markit, said: "We've seen the gradual slowdown in manufacturing sector conditions continue in the second quarter of fiscal year 2019-20, with the PMI average for the quarter at its joint-lowest since the same period in 2017."
"In September alone, forward-looking indicators such as business confidence and quantities of purchases were down, suggesting that companies are bracing themselves for difficult times ahead."
She said that public policy stimulus could potentially help the sector gain growth momentum, such as another reduction in the benchmark interest rate in August and the recent announcement of cuts to corporate taxes.
"In light of the weak results for economic growth and muted inflationary pressures signalled by the PMI data, we expect to see further monetary easing in the months ahead."
( With inputs from IANS )