The growth in the services sector, which makes up for nearly 60 per cent of the country's economic output, stood at 54.2 in February (down significantly from 57.5 in January), indicating a continued, albeit slower, expansion of service sector activity in India.
The robust pace of growth in the services sector witnessed in January could not be sustained in the month of February as there was a decline in new business orders.
"Activity in the services sector grew at a slower clip led by a deceleration in new business, but backlogs of work still increased," HSBC Chief Economist (India and ASEAN) Leif Eskesen said.
Growth in service sector activity has now been sustained for 16 successive months and service providers are optimistic about the 12-month outlook for the sector.
Around 42 per cent of survey respondents anticipate activity levels to be higher in the upcoming year, compared with only 3 per cent that expect a reduction.
The month of February saw output growth in the manufacturing sector being accelerated, whereas a slowdown was registered at service providers.
Accordingly, the HSBC India Composite Output Index which maps both the manufacturing and services index stood at 54.8 in February, down from 56.3 in January.
The latest reading indicated that private sector output growth eased to a three-month low.
Meanwhile, private sector companies continued to pass on higher costs to clients through increased output prices.
With the rate of inflation accelerating in both manufacturing and services firms, the overall pace of price rise was sharp, and the fastest in seven months.
"Input price inflation picked up notably, which was passed on to prices charged. The numbers underscore that the room for monetary policy easing is very limited," Eskesen said.
In its January 29 policy review, RBI after a nine-month long hawkish monetary policy stance, slashed its key interest rates by 0.25 per cent.
The central bank on January lowered interest rates by 0.25 per cent saying that with inflation showing signs of remaining range bound, it was now critical to arrest the loss of growth momentum.