Services growth in India loses more steam in April

BENGALURU (Reuters) - Growth in India's dominant services industry continued to lose momentum in April as domestic demand softened, a business survey showed on Wednesday.

Coupled with a slowing manufacturing sector and falling inflation, the findings are likely to strengthen expectations that the Reserve Bank of India will cut interest rates for the third time this year, possibly before its next scheduled policy review on June 2.

The HSBC Services Purchasing Managers' Index, compiled by Markit, fell to a three-month low of 52.4 in April from March's 53.0, but remained well above the 50 level that separates growth from contraction. It has been above that level for a year.

The index monitoring new business fell to a six-month low of 51.6 from March's 53.5, prompting some firms to cut jobs. Some respondents also reported tougher competition.

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

"An expansionary approach to monetary policy would, at a time when the economy is losing traction, provide much needed support for further growth."

The slowdown in the services and manufacturing industries could further amplify calls for much-needed economic reforms in India, one of the fastest growing economies in the world.

India's GDP is expected to have grown 7.4 percent in the first quarter of this year, down from 7.5 percent in the last three months of 2014.

(Reporting by Anu Bararia; Editing by Kim Coghill)