new delhi, June 5 -- India's services sector output rose to a three-month high in May, driven by strong export growth, even as the pace of new business and activity remained largely unchanged from levels in the previous three months. The seasonally adjusted HSBC India Services PMI Business Activity Index, compiled by S&P Global, edged up to 58.8 in May from 58.7 in April and 58.5 in March, staying well above the 50-mark that indicates expansion. However, it was still below February's 59. It said employment rose by a record, without giving figures, as companies scaled up operations to match sustained growth in sales. Both input costs and output charges rose above their historical averages, it added. "Strong international demand continued to fuel services activity, as evidenced by the new export business index's uptick from April," said Pranjul Bhandari, chief India economist at HSBC. "To keep up with swelling demand, India's service providers heavily increased staff recruitment. Indeed, the employment index rose to the highest reading ever recorded by this survey. Meanwhile, price pressures continued to intensify with input prices and charged prices both rising last month." The services sector accounts for more than half of India's gross domestic product, which expanded 6.5% in FY25, bolstered by a 7.4% growth in the January-March quarter. The economy grew 9.2% in FY24, driven by a 7.8% expansion in the January-March quarter, and surpassing the Reserve Bank of India's 7% forecast. The RBI projects 6.5% growth in FY26, driven by rural demand, public investment, and strong services exports. Manufacturing activity dropped to a three-month low in May as growth in new orders and output softened. The HSBC India Manufacturing Purchasing Managers' Index (PMI), compiled by S&P Global, fell to 57.6 in May from 58.2 in April and 58.1 in March. India's manufacturing PMI was 56.3 in February and 57.7 in January. The HSBC India Composite PMI Output Index stood at 59.3 in May, slipping slightly from 59.7 in April, indicating a continued sharp expansion in overall activity. "The downward movement in the headline index reflected softer growth of factory production, as services activity rose at a quicker pace," the survey said. "Regarding new business, there were slightly weaker increases at manufacturing companies and their services counterparts. At the composite level, the pace of growth remained sharp despite easing to a three-month low."...