Growth within India’s services sector accelerated in June, bolstered by robust demand and a record increase in export orders.

This is according to the findings from a business survey that also showed firms were hiring at their fastest rate in almost two years.

HSBC's India Services Purchasing Managers' Index, compiled by S&P Global, increased to 60.5 in June from 60.2 in May, nearing a Reuters poll average forecast of 60.6 and a preliminary reading of 60.4.

The reading has remained over the 50-mark, dividing growth from contraction, for close to three years.

“Activity growth in India’s service sector accelerated in June ... led by an increase in both domestic and international new orders,” said Pranjul Bhandari, chief India economist at HSBC.

Furthermore, new business, a crucial indicator of demand, has remained above the breakeven point since August 2021, and it grew at an accelerated rate last month. This growth was bolstered by the quickest increase in international orders since the sub-index was introduced to the survey almost 10 years ago.

This is promising news for India's economic prospects. The country is already the seventh largest exporter of services globally, as reported by the Reserve Bank of India (RBI).

Asia's third-largest economy experienced a better-than-forecast growth rate of 7.8% in Q1. However, a Reuters poll indicated that growth is anticipated to slow slightly this fiscal year.

Strong demand prompted service providers to hire more staff, resulting in the most robust job creation since August 2022. This has extended the current period of hiring growth to over two years.

However, overall positive sentiment for the upcoming year dropped to an 11-month low, driven by worries about market uncertainty and competition.

“Overall, service providers remain confident about the year-ahead business outlook, although the level of optimism moderated sharply during the month,” Bhandari added.

Moreover, the Reuters poll indicated that inflation is likely to fall below the mid-point of the RBI's medium-term target of 4% this quarter but is expected to rise in the next quarter. Despite this, the central bank is anticipated to cut interest rates to 6.25% by the end of the year.