By Anant Chandak

BENGALURU (Reuters) - Growth in India's dominant services industry accelerated last month, buoyed by strong demand and a record rise in export orders, according to a business survey that also showed companies were hiring at the fastest in nearly two years.

HSBC's India Services Purchasing Managers' Index, compiled by S&P Global, rose to 60.5 in June from 60.2 in May, close to a Reuters poll median forecast of 60.6 and a preliminary reading of 60.4.

It has been above 50, which separates growth from contraction, for nearly three years.

"Activity growth in India’s service sector accelerated in June ... led by an increase in both domestic and international new orders," noted Pranjul Bhandari, chief India economist at HSBC.

New business - a key gauge of demand - has been above breakeven since August 2021 and expanded at a faster pace last month. That was supported by the fastest rise in international orders since the sub-index was added to the survey nearly a decade ago.

That is good news for India's economic outlook, already the seventh largest services exporting country globally, according to the Reserve Bank of India.

Asia's third-largest economy posted faster-than-expected growth of 7.8% in January-March quarter but was expected to slow modestly this fiscal year, a Reuters poll found.

Strong demand encouraged service providers to recruit more staff. The pace of job creation was the strongest since August 2022, taking the current stretch of growth in hiring to over two years.

However, overall positive sentiment for the coming year slipped to an 11-month low due to concerns surrounding market uncertainty and competition.

"Overall, service providers remain confident about the year-ahead business outlook, although the level of optimism moderated sharply during the month," added Bhandari.

Meanwhile, costs rose at the slowest pace in four months, indicating cooling inflation, and the report said fewer than 5% of firms surveyed opted to pass cost burdens to clients, resulting in only a moderate rate of charge inflation.

The Reuters poll found inflation would likely fall below the mid-point of the RBI's medium-term target of 4% this quarter, but then pick up in the next one. Yet, the central bank was expected to cut interest rates to 6.25% towards year-end.

A rise in both manufacturing and services pushed up the overall HSBC India Composite PMI to 60.9 last month, matching the flash estimate, from 60.5 in May.