India's services sector expanded at a quicker pace in February, with the seasonally adjusted HSBC India Services PMI Business Activity Index rising to 59.0 from January's 26-month low of 56.5, according to data from S&P Global released Wednesday.

The rebound was driven by stronger domestic and international demand, leading to an increase in new orders and a sharp rise in employment. External sales grew at the fastest rate in six months, with service providers reporting better demand from Africa, Asia, Europe, the Americas, and the Middle East.

Despite rising cost pressures from labor, food, and materials, the overall rate of cost inflation eased to a four-month low. However, selling price inflation remained above the long-run average, with the strongest price increases reported in the transport, information, and communication sectors.

"Global demand, which grew at its fastest pace in six months according to the new export business index, played a major role in driving output growth for India's services sector," Chief India Economist at HSBC Pranjul Bhandari said. "Looking ahead, business sentiment remains broadly positive, but did slightly slip last month to its lowest level since August 2024."

Aggregate private sector output also expanded at a faster pace in February, with the HSBC India Composite Output Index climbing to 58.8 from 57.7 in January, according to the recently released data. The acceleration was led by services, while manufacturing growth slowed.