Nov services activity grows at fastest pace in 5 months

BENGALURU (Reuters) - Activity in India's services sector expanded at its fastest rate in five months in November, driven by surging new orders as firms cut prices on tumbling raw material costs, a business survey showed on Wednesday.

The outlook was clouded, however, by business confidence slumping to a more than seven-year low.

The HSBC Services Purchasing Managers' Index (PMI), compiled by Markit, rose to 52.6 in November. Growth in October had stalled at 50, the level that demarcates growth from contraction.

"Despite the uptick in order flows, business sentiment deteriorated, reminding us that continued policy action that addresses investor concerns is needed to sustain growth momentum," said Pranjul Bhandari, chief India economist at HSBC.

The new business sub-index accelerated to 52.5 in November, its highest since July, signaling improving demand as firms cut prices for the first time in over four years.

A sharp fall in global crude oil prices coupled with softer food costs lowered consumer inflation in India to 5.52 percent in October.

The survey showed input costs for services firms fell for the first time in over five years in November.

Indian economic growth slowed to 5.3 percent in the third quarter of 2014 from 5.7 percent in the prior quarter.

The Reserve Bank of India kept key interest rates unchanged on Tuesday but hinted at a possible cut early next year if inflation remained subdued and the government controlled the fiscal deficit.

The government has identified key areas for reform, such as raising foreign investment caps on various sectors and reducing subsidies, although most of those plans have yet to be implemented.

(Reporting By Siddharth Iyer; Editing by Kim Coghill)