Covid-19-triggered local restrictions continued to subdue India's service sector production in July, but the rate of declined has slowed, the IHS Markit India Services PMI report said.
Business activity, new orders, and employment declined further, but in all cases, the rates of contraction moderated from June.
Besides, firms were pessimistic about the 12-month outlook for output for the first time in a year.
Consequently, the seasonally-adjusted India Services Business Activity Index was in contraction territory for the third month in a row.
However, rising from 41.2 in June, the latest reading pointed to a slower rate of reduction at 45.4 in July.
The seasonally adjusted index reading remained below the critical 50-mark that separates growth from contraction.
Furthermore, the report cited that new work intakes fell for the third month running in July, albeit at a softer pace than in June.
Additionally to the challenging conditions domestically, firms observed a further deterioration in international demand for services.
New business from abroad decreased at a sharp pace that was little-changed from June.
On the combined level -- manufacturing and services -- the Composite PMI Output Index rose from 43.1 in June to 49.2 in July pointing to the slowest rate of reduction over this sequence.
IHS Markit Economics' Associate Director Pollyanna De Lima said: "The current Covid-19 environment continued to weigh on the performance of the service sector that is so crucial to the Indian economy. July data was somewhat disappointing, with incoming new business and output falling solidly over the month, but there was at least a slowdown in rates of contraction."
"Uncertainty over when the pandemic will end, as well as concerns about inflationary pressures and financial troubles, dampened business confidence in July. Service providers were pessimistic towards the outlook for business activity for the first time in a year. Downbeat assessments and ongoing declines in new work caused another round of job shedding in the service sector."
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