Raising level does, but would rare candy raise it
It can also serve as healing item so that may raise it too
(Trying to evolve budew)
Yes! The Rare Candy is part of the Vitamin group of items, which can increase happiness in Platinum.
If your Budew's happiness is between 0-99, a Rare Candy will increase it by 5. If your happiness is between 100-199, it will increase by 3. If your happiness is between 200-255, it will increase by 2.
Hope I helped. :)