The HSBC India Services Business Activity Index, which tracks changes in activity at Indian services companies on a monthly basis, rose to an eight-month high of 53.9 in February, as against 52.4 in the previous month, indicating a robust expansion across the sector.
A score above 50 indicates that the sector is expanding, while a figure below that level means contraction.
Strong new business growth was the primary factor cited by survey respondents for the increase in activity.
Nonetheless, the latest improvement in economic prospects across the sector is yet to feed through to the labour market, as employment scenario did not improve much during the month.
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"Amid reports of shortages of skilled workers, services employment was broadly unchanged from the levels registered in the previous month," the survey said.
On prices, HSBC said that the input cost inflation across the Indian service economy moderated during February. The rate of increase was only "slight", while the output prices increased for the third successive month albeit at a "softer" pace than that seen in January.
However, the Reserve Bank early this morning slashed key policy (repo) rate by 0.25 per cent to 7.5 per cent, the second such surprise rate cut outside regular policy review in less than two months encouraged by softening inflation and fiscal consolidation roadmap by the government.
Going forward, HSBC said, almost 26 per cent of those surveyed anticipate higher business activity over the course of the next year, which they commonly linked to improved market conditions, low inflation rates, increased marketing and favourable exchange rates.