Growth in India's dominant services sector in January slumped to the slowest in more than two years as demand softened but remained strong and led to a substantial rate of hiring, said a private survey on Wednesday.

       The HSBC final India Services Purchasing Managers' (PMI) Index, compiled by S&P Global, fell to 56.5 in January from 59.3 in December, lower than a preliminary estimate of 56.8 but ahead of the 50-mark separating contraction from growth. The index has been above the neutral 50-mark that separates contraction from expansion for 42 months straight.

       “Overall new business continued to increase strongly but the rate of expansion softened to the weakest in 14 months. The rise was attributed to strong demand and decisions to offer better prices than rivals. Growth was reportedly curbed by intense competition,” said the survey.

       "The business activity and new business PMI indices eased to their lowest levels since November 2022 and November 2023 respectively," said Pranjul Bhandari, chief India economist at HSBC.

       “That said, new export business partly countered the downtrend and continued to rebound from a dip in late-2024, in line with official data which showed India’s services exports shining in December and capturing a larger share of global trade," she said.

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       The survey reported a quicker increase in international sales as respondents noted gains from clients in Asia, Europe, West Asia and the Americas. International demand in January hit a five-month high.

       The survey said that new business intakes and capacity pressure prompted service providers to recruit additional staff in the early third quarter of the financial year. “According to them, full- and part-time positions had been filled. The rate of job creation accelerated from December and was among the fastest seen since data collection started in December 2005.”

       Services firms noted another uptick in expenses, driven by staff costs and food prices. The rate of inflation was little-changed from that seen around the turn of the year, therefore remaining above its long-run average.

       “As a result of rising cost burdens and demand resilience, prices charged for the provision of Indian services increased further at the start of 2025. Having accelerated from December, the rate of charge inflation was marked and above its trend,” it noted.

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