India's dominant services sector expanded at the fastest pace in six months in January on robust demand, according to a business survey which also showed output prices rose at their slowest rate since February 2023 and optimism was at a four-month high.

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That indicated India would continue to hold its title of fastest growing major economy over the coming months, reducing pressure on the government and allowing it to focus on fiscal consolidation over the coming year.

The HSBC final India Services Purchasing Managers' Index, compiled by S&P Global, jumped to 61.8 last month from December's 59.0.

The final reading also beat a preliminary estimate of 61.2, remaining above the 50-mark separating expansion from contraction for a 30th consecutive month.

"New business expanded at a faster pace and managers' expectations for future activity was strong. The new export business index accelerated, signaling that India's services exports remained robust," said Ines Lam, economist at HSBC.

While the new business sub-index, in expansionary territory for two-and-half years, showed demand rose at the quickest pace since July, exports were at a three-month high.

That kept firms optimistic at the start of the final quarter of fiscal year 2023-24 with confidence around year-ahead activity hitting its highest since September, encouraging firms to continue adding workers.

Although operating costs rose at the quickest pace since August, prices charged increased at the slowest pace in nearly a year, indicating a moderation in inflation.

Overall inflation in the country picked up to a four-month high in December and remained above the Reserve Bank of India's medium-term 4% target. That ,alongside strong economic growth, is expected to prompt the central bank to keep interest rates steady at least for a few months.

With manufacturing activity expanding at the fastest pace in four months and services industry growth remaining robust, the overall HSBC India Composite PMI Output Index rose to a six-month high of 61.2 in January from December's 58.5 and better than a flash estimate of 61.0.