"Services Growth Slips In April, Raises Rate Cut Hopes"

The slower rise in service sector activity was matched by a softer increase in manufacturing production. As a result, the headline HSBC India Composite PMI Output Index fell from 53.2 in March to a six-month low of 52.5 in April, HSBC said.

On prices, HSBC said that in line with rising raw material costs, average input prices in the Indian service economy increased further in April. Nonetheless, the rate of inflation was moderate.

"Inflation rates for both input and output prices were weak by historical standards, providing the RBI with more scope for further rate cuts," Lima said.

Lima further added that an expansionary approach to monetary policy would, at a time when the economy is losing traction, provides much needed support for further growth.

The central bank has lowered its policy rate twice so far in 2015, but maintained a status quo in its last monetary policy review on April 7 on fears of unseasonal rains impacting food prices.

The next review meeting is scheduled on June 2, although the previous two cuts have taken place outside the scheduled policy reviews.
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