Indian Service Sector Slows in July after June's Record High

India's service sector growth plunged in July as new orders slowed last month, according to HSBC Services Purchasing Manager Index (PMI). The index declined to 52.2 in July from June's 17-month high of 54.4.

(A reading above 50 denotes surge, while below it denotes contraction)

"Growth in the services sector softened in July after a big jump in the previous month. Nevertheless, the sector recorded its third consecutive month of expansion," Reuters quoted a statement from Frederic Neumann, co-head of Asian Economic Research at HSBC.

The data also revealed the input costs that surged at a slower rate in July and the companies were able to pass on a bigger portion to customers by raising prices.

"Final prices were marked up at a faster pace to reflect rising costs, underscoring the need for the Reserve Bank of India to remain cautious about inflation risks," Neumann added.

On Tuesday, the Reserve Bank of India kept the repo rate steady at eight percent during the third bi-monthly policy review. The bank has also decided to keep inflation target at eight percent by 2015 and six percent by January 2016. It has also decided to trim the SLR by 50 bps to 22 percent that will be effective from 9 August.

Service Sector in India:

This sector accounts for around 60 percent of gross domestic product. The share of services in India's GDP has surged from 33.3 percent (1950-1951) to 56.5 percent in 2012-2013, according to India Brand Equity Foundation.

India's total export of IT services during 2012-13 was approximately ₹3.41 trillion, which witnessed a growth of 37 percent over the previous year.

Service sector in India comprises trading, transportation, communication, IT services, real estate, community and other personal services.