India's Services Industry Expands at a Slower Pace in August, PMI Shows

India’s services industry growth cooled in August for a second month after climbing to a two-year high in June, a survey of purchasing executives showed.

The HSBC Holdings Plc and Markit Economics purchasing managers’ index fell to 59.3 from 61.7 in July, according to an e-mailed report today. A reading above 50 indicates an expansion. The index was at 64 in June.

“Service sector activity, which in India accounts for the bulk of economic output, slowed a little last month,” Frederic Neumann, co-head of Asian economic research at HSBC, said in the report. “But monetary officials can hardly afford to relax their guard. Growth remains strong.”

The services gauge expanded for a 16th straight month in August, indicating consumer demand is holding up in Asia’s third-largest economy. Economists including Barclays Plc’s Rahul Bajoria expect the Reserve Bank of India to raise rates for the fifth time this year after the economy expanded 8.8 percent last quarter, the fastest pace in 2 1/2 years, stoking inflation.

“The Reserve Bank of India will remain focused on controlling inflation,” Singapore-based Bajoria, said before the report. He expects the RBI to boost rates by a quarter-point in the next monetary policy announcement on Sept. 16.

Inflation Woes

India’s benchmark wholesale-price inflation rate has stayed around or above 10 percent since January. Food-price inflation accelerated to 10.86 percent in the week to Aug. 21 from 10.05 percent the previous week, according to a statement from the commerce ministry today.

The Reserve Bank’s reverse repurchase rate is 4.5 percent and the repurchase rate is 5.75 percent.

Ten-year government bond yields fell 2 basis points to 7.96 percent at 11:40 a.m. in Mumbai. The Bombay Stock Exchange’s Sensitive Index was little changed at 18,252.73.

Services make up about 55 percent of India’s $1.3 trillion economy.

Rising demand for mobile phones and bank loans provides evidence of growing consumption in the South Asian nation.

Wireless telecommunication firms including Bharti Airtel Ltd. added 11.5 million new customers in July, about 2.5 percent more than the previous month, according to the Cellular Operators Association of India.

Bank lending to businesses and individuals grew 20.14 percent in the two weeks to Aug. 13 from a year earlier, which is near the fastest pace since January 2009, central bank data show.