Activity in India's dominant services industry expanded for the first time in eight months in October as demand surged, but pandemic-hit firms continued to cut jobs, a private survey showed on Wednesday.
The findings, coupled with a similar survey on Monday which found Indian manufacturing growth expanded at its fastest pace in over a decade, suggest a recovery in Asia's third-largest economy is under way.
The Nikkei/IHS Markit Services Purchasing Managers' Index climbed to 54.1 in October from September's 49.8. It was the highest reading since February and comfortably above the 50-mark separating growth from contraction.
"It's encouraging to see the Indian service sector joining its manufacturing counterpart and posting a recovery in economic conditions from the steep deteriorations caused by the COVID-19 pandemic earlier in the year," Pollyanna De Lima, economics associate director at IHS Markit, said in a release.
"Service providers signalled solid expansions in new work and business activity during October. They were also more upbeat about the outlook, though hopes of output growth in the year ahead were pinned on a COVID-19 vaccine."
A sub-index tracking overall demand showed it expanded for the first time since February but new export business remained firmly in contraction territory as restrictions imposed across the world due to the COVID-19 pandemic hammered foreign demand.
That led firms to cut jobs for the eight straight month, the longest streak on record.
"Survey participants indicated that workers on leave had not returned and that a widespread fear of COVID-19 contamination continued to restrict staff supply," De Lima added.
The composite PMI, which includes both manufacturing and services, rose to 58.0 last month, its highest since January 2012, from September's 54.6.
Although service providers remained optimistic about the year ahead - optimism strengthened to a seven-month high last month - the expectations index remained well below the long-term average.
Input costs increased at the quickest pace since February but firms absorbed much of the jump to win business amid growing concerns that rising coronavirus infections could halt the nascent recovery in the services industry, which contributes over 60% to the country's gross domestic product.
India has the world's second-highest coronavirus caseload at well over 8 million, behind only the United States. New daily cases in India have been falling since September, but experts warn infections could rise again during the festival season.
