BENGALURU: Growth in India's dominant services industry picked up last month after dipping to a 10-month low rate in September amid a marked expansion in demand, according to a business survey that also showed the sector's workforce increased sharply.

That signaled a relatively strong start for Asia's third-largest economy in 2024's final quarter and supports Reuters poll forecasts for 7.0% growth this quarter after 6.8% last quarter.

Services accounted for about 55% of gross domestic product (GDP) in fiscal year 2023-24, government data showed.

The HSBC final India Services Purchasing Managers' Index , compiled by S&P Global, rose to 58.5 in October from September's 57.7, exceeding a preliminary estimate of 57.9.

The index has been above the 50-mark separating expansion from contraction for 39 consecutive months.

"During October, the Indian services sector experienced strong expansions in output and consumer demand, as well as job creation," noted Pranjul Bhandari, chief India economist at HSBC.

Robust demand at home and overseas meant a reacceleration in the new business sub-index and stronger exports to many regions including Africa, Asia, the Americas, the Middle East and Britain.

That induced services firms to hire additional staff, with the fastest rate of employment generation in 26 months. The business outlook for the coming year stayed positive owing to upbeat projections, but the index eased slightly from September.

Meanwhile, strong demand allowed service providers to hike their prices in response to three-month high cost pressures from increased expenses for food - eggs, chicken, meat and vegetables - as well as labour and transportation.

That increased the risk of inflation rising further in the world's most populous country after spiking to a nine-month high of 5.49% in September, denting consumers' spending capacity and could encourage the Reserve Bank of India to keep interest rates high.

A narrow majority of economists in a Reuters poll expected the RBI to trim rates by 25 basis points to 6.25% next month.

A manufacturing PMI released on Monday rose to 57.5 last month. That, along with the improvement in services activity pushed up the overall Composite PMI to 59.1 from September's 58.3.

(Reporting by Anant Chandak; Editing by Kim Coghill)