Healthy rise in new orders accelerated India's services sector output growth in February.
Moreover, the roll out of the Covid-19 vaccine led to an improvement in business confidence towards growth prospects.
However, employment declined for the third month in a row and companies noted the sharpest rise in overall expenses for eight years.
Consequently, rising from 52.8 in January to 55.3 in February, the seasonally adjusted India Services Business Activity Index pointed to the sharpest rate of expansion in output in one year.
The seasonally adjusted index reading remained above the critical 50-mark that separates growth from contraction.
Besides, the latest reading extended the current growth sequence to five months.
Survey participants linked the upturn to improved demand and more favourable market conditions.
On the other hand, panellists continued to indicate that the Covid-19 pandemic and travel restrictions curbed international demand for their services.
Furthermore, the overall India private sector output including manufacturing and services rose at the quickest pace in four months during February.
Resultantly, the Composite PMI Output Index increased from 55.8 in January to 57.3, highlighting a sharp rate 40 of expansion that outpaced the series average.
The survey report said that manufacturers led the upturn, despite growth easing here while picking up at service providers.
Growth of aggregate new orders also reached a four-month high in February.
"Economic activity is generally expected to recover in the final quarter of fiscal year 2020-21 after coming out of technical recession in Q3, and the latest improvement in the PMI indicators points to a strong expansion in the fourth quarter should growth momentum be sustained in March," said Pollyanna De Lima, Economics Associate Director at IHS Markit.
"Again, inflation remains a topic of concern. Input costs across the private sector rose to the greatest extent in over seven years, but companies were reluctant to lift output charges due to competitive pressures and efforts to secure new work. Once firms' additional cost burdens start to feed through to clients via price hikes, demand strength may come under pressure."
