Indian services sector growth falls to lowest in 20 months

India's services sector registered its slowest pace of growth in 20 months in May as soaring prices and interest rate hikes cut into business growth and reduced the level of optimism, according to a survey.

The seasonally adjusted HSBC Markit Business Activity Index today showed a slump to 55.0 in May from 59.2 in April, marking its 25th straight 'above-50' month. The 50 level separates growth from contraction.

While the latest reading, which surveyed 400 firms underlines a reasonably solid pace of growth in the services sector, the decline points to continuous rate rises for reining-in inflation, putting the brakes on India's rapid expansion.

According to analysts, the easing of momentum for business activity and new business was evidence that policy tightening and high inflation was filtering through to growth.

All sub-indexes were down as compared to April, except for input costs and employment.

While new business received by service companies continued to be strong, the pace of expansion fell with the sub-index falling to its lowest level since October last year.