India's services sector expanded in November for the first time in two months as new business accelerated despite persistent inflationary pressures, a survey showed on Monday.
The seasonally adjusted HSBC Markit Business Activity Index — based on a survey of around 400 firms — stood at 53.2 in November, above the 50-mark that separates growth from contraction.
It had fallen to 49.1 in October after contracting for the first time in more than two years in September to 49.8.
'The service sector demonstrated resilience, with both activity and new business on the rise,' said Leif Eskesen, economist at HSBC.
'Unfortunately inflation continues to tick up as well, calling for the Reserve Bank of India to maintain tight monetary conditions for an extended period.'
The survey showed input prices and prices charged continued to rise sharply in November, an indication that inflation in the Indian economy will likely to stay high over the coming months.
India's main inflation gauge, the wholesale price index, stayed above 9 percent for the 11th month in a row in October.
The Reserve Bank of India has raised its interest rates 13 times since early 2010 to cool prices and is now largely seen pausing at its policy review on December 16 as risks to growth take precedence over inflationary pressures.
Despite tight monetary conditions, the sub-index for new business accelerated to 52.3 in November from 51.0 in October, driving the turnaround in the service sector.
The partially convertible rupee, which weakened to a record low in November, could prove a boon for Indian IT service stalwarts such as Infosys and Tata Consultancy Services that get more than half their revenue in U.S. dollars.
But the business expectations index, a gauge of what firms think about the future, fell in November to a near three-year low, suggesting the fragile global economic outlook might hurt the export-dependent sector in the future.
A similar survey of the manufacturing sector last Thursday showed India's factories expanded at a slower pace in November, but export orders grew for the first time in five months.