Activity in the services sector expanded for the first time in eight months with a pick-up in demand, but firms continued to shed jobs on account of the pandemic.

The India Services Business Activity Index, compiled by IHS Markit, stood at 54.1 in October compared with 49.8 in September. A reading above 50 indicates an expansion in business activity and below 50, contraction.

With manufacturing activity climbing to its highest in over a decade, the Composite PMI Output Index rose to 58 in October from 54.6 in September, the strongest in close to nine years.

“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,” said Pollyanna De Lima, economics associate director at IHS Markit.

Lima noted that “while a revival of the manufacturing industry began in August, only now has the service sector started to heal. Service providers signalled solid expansions in new work and business activity during October”.

Services companies reported an increase in new work intakes, which they attributed to successful marketing efforts and strengthening demand.

In jobs, there was another monthly decline in employment. The pace at which jobs were being shed was high and matched that of September.

“Survey participants indicated that workers on leave had not returned and that widespread fear of Covid-19 contamination continued to restrict staff supply,” Lima said.