By Shaloo Shrivastava

BENGALURU (Reuters) - Growth in India's dominant services sector remained robust but slackened to a 10-month low in September as demand slowed, a business survey showed on Friday.

The HSBC final India Services purchasing managers' index, compiled by S&P Global, fell to 57.7 in September from a five-month high of 60.9 in August and was below a preliminary estimate of 58.9.

"The headline business activity index fell below 60 for the first time in 2024, but we note that at 57.7, it was still much above the long-term average," noted Pranjul Bhandari, chief India economist at HSBC.

For more than three years, the index has stayed above the 50-mark separating expansion from contraction.

The new business sub-index - a gauge for overall demand - slipped to its lowest since November but was still above its historical average. International demand rose at its slowest pace this year.

Nevertheless, the business outlook for the year ahead improved, prompting firms to continue adding headcount. Hiring picked up slightly from August, extending the streak of job creation to more than two years.

Cost inflation accelerated from August as prices of electricity, food and other materials increased. However, firms passed on extra costs to clients at the slowest pace since February 2022.

"Services companies' margins have likely been squeezed further, as prices charged rose at a slower pace when input cost inflation intensified," added Bhandari.

Indian inflation was below the Reserve Bank of India's (RBI) 4% medium-term target in July and August. It was predicted to average 4.2%-4.6 in each quarter until at least July 2026, according to a recent Reuters poll.