Services sector remained sluggish in June and grew at the second slowest pace in the last 12 months.

The Nikkei India Services Business Activity Index recorded 50.3 in June, marking its third straight month of decline and was at its lowest level since November last year.

“The headline index was down from 51 in May, pointing to a slower pace of expansion that was marginal,” said a Nikkei release on Tuesday, adding that anecdotal evidence suggested that strong competitive pressures restricted new business gains.

Meanwhile, the Nikkei India Composite PMI Output Index rose to a three-month high of 51.1 in June from 50.9 in May.

A reading above 50 indicates expansion while one below means contraction.

The data are likely to once again set off calls for a rate cut by the Reserve Bank of India in its next policy review on August 9.

Adding to the concern, future expectations for new business were also muted in the services sector.

“Although services companies remained upbeat regarding the 12-month outlook for output, the degree of optimism softened in June,” it said, adding that the optimism was the lowest since February.

“Future expectations dipped to the lowest since February, highlighting concerns regarding the sustainability of the economic upturn...Nonetheless, India remains a leading performer within emerging markets at a time when many of its peers are struggling,” said Pollyanna De Lima, economist at Markit, which compiles the survey.

According to the survey, the growth of incoming new work was at an 11-month low. New business rose in only three of the six tracked categories of financial intermediation, transport and storage and other services.

Sluggish job creation Job creation too was marginal among service providers and only one per cent of the firms reported fresh hiring.

Prices charged by Indian service providers continued to rise in the latest survey period. The rate of cost inflation was moderate and below its long-run trend though input prices rose for the ninth consecutive month in June.

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