India's services sector drops to six-month low in May

Growth in India's services industry slowed sharply in May to a six-month low, due to a deceleration in new orders, a business survey showed on Friday.

The Nikkei/Market Services Purchasing Managers' Index slumped to 51.0 in May from April's 53.7. A reading above 50 indicates expansion.

"Ongoing weakness in manufacturing and services was evident in May, with output growth losing momentum for a second straight month. Overall expansion across the two sectors was the lowest since last November, as was the case for new orders," said Pollyanna De Lima, an economist at Markit.

A sister survey on Wednesday showed factory growth expanded only slightly as output growth softened again. 

The services new business sub-index, an indicator of both domestic and foreign demand, cooled to a 10-month low of 50.9 in May from April`s 53.7, possibly because companies raised their prices at a faster pace.

The Reserve Bank of India is not expected to cut rates at its June 7 policy meeting after retail inflation rose to 5.39 % in April, above Governor Raghuram Rajan`s near-term target of 5 % by March 2017. 

Despite the gloomy picture painted by the latest PMI numbers, India was one of the world`s fastest growing economies last quarter, with gross domestic product growing at a quicker-than-expected pace of 7.9 %.

Despite the sudden slowdown in new business, service providers continued to remain optimistic about growth in the year ahead, with the business expectations sub-index firmly in positive territory.