Activity in India's dominant services sector remained strong in July due to robust demand, resulting in significant job creation, according to the findings of a survey out on Monday.

However, elevated cost pressures led to a seven-year high in selling-price inflation.

The HSBC final India Services Purchasing Managers' Index , compiled by S&P Global, declined slightly to 60.3 in July from 60.5 in June, falling short of an initial estimate of 61.1.

Despite the elevated cost pressures, the overall pace of expansion was strong, with the index staying above the 50-mark, dividing growth from contraction, for the 36th consecutive month.

This marked the longest expansion streak since the series began in December 2005, Reuters reports.

“Service sector activity rose at a slightly slower pace in July, with new business increasing further, primarily driven by domestic demand. Looking ahead, services firms remained optimistic about the outlook for year-ahead,” said Pranjul Bhandari, chief India economist at HSBC.

Robust demand and favourable conditions boosted the new business sub-index. Although international demand grew at a slower rate compared to June's fastest rise in a decade, it still reflected robust demand from overseas.

The new export business gauge reached its third-highest level since the sub-index was introduced in September 2014, with the first and second highest recorded earlier this year in May and June, respectively.

The strong demand outlook led to a rebound in expectations for activity over the next 12 months, raising the future activity sub-index from an 11-month low recorded in June.

In addition, selling price inflation surged last month, reaching the joint-highest level in seven years as firms passed increased costs onto clients, according to the survey.

Data for June, released last month, revealed that the nation's annual retail inflation rose to 5.08%, its first increase since December, surpassing the Reserve Bank of India's (RBI) medium-term target of 4.00%.

According to a Reuters survey conducted last week, the Reserve Bank of India is forecast to lower its repo rate by 25 basis points to 6.25% next quarter.

However, there was no clear consensus on where the interest rate would be by the end of the year.