India’s dominant services industry activity expanded at its fastest pace in four months in October as demand continued to strengthen despite accelerating price pressures, a business survey showed on Friday.

The Nikkei/IHS Markit Services Purchasing Managers’ Index rose to 51.7 last month — its highest since June — from 50.7 in September.

In July and August, the index was below the 50-mark that separates growth from contraction.

During those months, confusion over product pricing following the implementation of the new goods and services tax (GST) pushed manufacturing and services sectors into contraction.

Aashna Dodhia, an economist at IHS Markit, said recovery from the GST implementation “was sustained in the private sector in October, mainly radiating from service providers as growth in manufacturing was relatively subdued."

A sister survey showed manufacturing activity barely expanded last month.

However, services demand has been recovering since September and the latest survey showed the new business sub-index, a proxy for both domestic and foreign demand, rose to 51.5 in October from 51.1 a month before.

This helped a composite index that takes into account both manufacturing and services activity rise to a four-month high of 51.3 last month from September’s 51.1.

Firms raised prices at a sharper rate to end-consumers than their costs rose, signalling a pickup in inflation over coming months.

Retail inflation held steady at an annual pace of 3.28% in September, below the Reserve Bank of India’s medium-term target of 4%.

Economic growth slowed to 5.7% in the April-June quarter from a year earlier, its weakest in three years. The economy is expected to expand 6.7% this fiscal year, its weakest pace in four years, a recent Reuters poll showed. Reuters

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