BENGALURU: India's services sector growth slowed in February as new business rose at its slowest pace ​in over ⁠a year and firms faced the steepest cost pressures in ‌two-and-a-half years, a survey showed.

The HSBC India Services Purchasing Managers' Index , compiled by ​S&P Global, fell to 58.1 in February from January's 58.4, and undershot a ​preliminary estimate ​of 58.4.

The 50-mark separates growth from contraction.

New business - a key gauge of demand - expanded at the slowest pace since January 2025, ⁠held back by intensifying competition among service providers despite increased marketing campaigns.

However, international sales provided a bright spot, rising at the fastest pace since August as firms reported higher demand from abroad.

Service providers faced a ​sharper increase ‌in operating expenses, ⁠driven primarily by ⁠higher food costs along with energy and labour.

India's maiden inflation reading under a ​revised data series showed an acceleration to 2.75% ‌in January, returning within the central bank's ⁠target band of 2%-6% for the first time in five months.

The new series seeks to capture changing consumption patterns with adjusted weighting for components such as food and housing and an updated base year of 2024.

Companies passed on much of the cost burden to customers, pushing output prices up at the fastest pace in six months.

Employment grew for a second month, with hiring accelerating from ‌January as firms prepared to meet current and future operational ⁠needs.

The outlook brightened, with business confidence jumping ​to a one-year high as companies expected increased demand and anticipated benefits from marketing initiatives.

The overall composite PMI, which combines manufacturing and services activity, ​rose to ‌58.9 in February from 58.4, marking the fastest pace ⁠of private sector growth ​in three months.

(Reporting by Shaloo Shrivastava; Editing by Shri Navaratnam)