India's services sector growth improved in August - registering the fastest pace in six months - as the segment continued to show "resilience" amid sagging economic scenario, an HSBC survey said.
The HSBC's Services Purchasing Managers Index (PMI) for August inched upwards to 55, from 54.2 in July. The index has kept above the 50-mark below which it indicates contraction, since November 2011.
"The service sector continues to demonstrate resilience with activity picking up pace in August. Moreover, growth in new orders and employment are also on the rise," HSBC chief economist for India [ Images ] and ASEAN Leif Eskesen said.
August witnessed the fastest pace of growth in new business orders since February and there was also marked increase in optimism about the future, HSBC said.
Private sector companies in India witnessed a further rise in new orders during August. It was the sixth successive month of job creation in the sector.
Earlier an HSBC survey had shown that India's manufacturing sector witnessed the weakest growth rate in nine months in August because of shrinking export orders and disruptions caused by power failures.
Accordingly, the HSBC India Composite Output Index, which maps both services and manufacturing activity, fell slightly to 54.3 in August from 54.4 in July.
On the inflation front, HSBC said even though the readings improved to some extent, higher wage costs and solid demand are keeping inflation pressures "firm".
"With inflation risks still lingering, partly on the back of deficient monsoons, and policy inaction from Delhi [ Images ] persisting, the RBI has little room and appetite for rate cuts," Eskesen said.
In its last quarterly monetary policy review, the Reserve Bank left key interest rates unchanged amid fears of deficient monsoon and high inflation.
RBI also lowered the economic growth projection for the current fiscal to 6.5 per cent from its earlier estimate of 7.3 per cent, stating that the rising government expenditure poses risks to economic stability.
Besides, RBI raised inflation forecast for the fiscal ending March, 2013 to 7 per cent, from the earlier projection of 6.5 per cent.
Meanwhile, according to official data, the poor showing by the manufacturing sector has pulled down the GDP growth to 5.5 per cent in the first quarter of this fiscal.
The growth rate in the first quarter (April-June), according to the data released by the government last Friday, slipped to 5.5 per cent, from 8 per cent in the same period last fiscal on account of flat growth in manufacturing and quarrying sectors.