India's service sector continued to expand in January due to rapid and steady growth in new export orders.

The HSBC Purchasing Managers’ Index (PMI) data prepared by Markit and released on Tuesday rose to 57.5 in January from 55.6 in the previous month, its fastest pace in a year. Readings above 50 indicate expansion. The latest data on the country's service sector, which makes up 60 percent of the economy, comes at a time when India's manufacturing sector appears bogged down by weak overseas demand. The new business sub-index rose to 58.3, the highest it's been since August 2011.

"Service sector activity continued to pick up pace led by a faster inflow of new business," said Leif Eskesen, HSBC's chief economist for India and Southeast Asia, in the release.

“The overall rate of expansion was sharp and the fastest in 11 months. Whereas growth in the manufacturing sector eased, services new orders rose at the fastest pace in 18 months. Payroll numbers in the Indian private sector rose for the eleventh month running in January, amid evidence of increased volumes of incoming new work,” the survey stated.

Inflation showed a marginal increase, led by pressure from fuel, raw materials and labor costs, according to the data. The input and output prices increased at the same pace as in the previous month, but lower than a year ago.  

The Reserve Bank of India had cut its key interest rates by 25 basis points in its January monetary review meeting after wholesale price inflation moderated to a three-year low of 7.18 percent in December.

India’s manufacturing sector PMI posted a reading of 53.2 in January, down from 54.7 in December -- its lowest in three months -- as the volume of new export orders eased from the previous month, according to a survey finding released by HSBC last week.