India's services sector growth eased to a three-month low in June but service providers continued to signal positive demand trends, which resulted in a stronger increase in new business volumes and further job creation, a monthly survey said on Wednesday.

The seasonally adjusted S&P Global India Services PMI Business Activity Index fell from 61.2 in May to 58.5 in June. Despite falling from May, the latest figure was consistent with a sharp pace of growth.

For the 23rd straight month, the headline figure was above the neutral 50 threshold. In Purchasing Managers' Index (PMI) parlance, a print above 50 means expansion while a score below 50 denotes contraction.

Also read: Despite manufacturing PMI slipping to 57.8 in June, optimism still prevails

According to survey members, the upturn stemmed from ongoing increase in new business, a healthy demand environment and marketing initiatives.

"Demand for Indian services continued to surge higher in June, with all four monitored sub-sectors registering quicker increases in new business inflows," said Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence.

This bullish pick-up in growth momentum supported a further sharp upturn in business activity and encouraged another uplift in employment figures, boding well to near-term growth prospects, Lima added.

On the price front, there were mixed trends. Input costs rose at a slower rate that was broadly aligned with its long-run average, but charge inflation quickened to a near six-year high.

"Combined with manufacturing, output prices across the private sector increased at the sharpest pace in over a decade," Lima said.

One-in-ten firms noted higher operating expenses, citing greater food, construction material and wage costs. The remaining panellists indicated no change since the previous month.

"The latest PMI results for output charges coupled with upside risks to food prices suggest that interest rates are highly unlikely to be reduced as 2023 progresses," Lima said.

The Reserve Bank of India on June 8 left key interest rate unchanged for a second straight policy meeting but signalled that it wants to see inflation moderate more while preserving the growth momentum.

The monetary policy committee (MPC), which has three members from RBI and an equal number of external experts, voted unanimously to keep the benchmark repurchase, or repo rate unchanged at 6.50 per cent.

The survey further noted that predictions of further demand strength, favourable market conditions and customer relations boosted business confidence in June. "Companies were at their most upbeat towards growth prospects in 2023 so far," it said.

Meanwhile, the S&P Global India Composite PMI Output Index -- which measures combined services and manufacturing output -- fell from 61.6 in May to 59.4 in June.

Despite falling from May, the S&P Global India Composite PMI Output Index was still indicative of a sharp rate of growth, the survey said.

The S&P Global India Services PMI is compiled by S&P Global from responses to questionnaires sent to a panel of around 400 service sector companies. The panel is stratified by detailed sector and company workforce size, based on contributions to GDP. Data collection began in December 2005.

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