Even as the services Purchasing Managers'Index (PMI) jumped to 41.8 in August from July's 34.2, it continued to remain in the contraction zone. The services activity last month remained under sub-50 for the sixth straight month amid continued restrictions due to coronavirus that took toll on the business operations and demand, causing the longest streak of job losses on record.
In PMI parlance, a print above 50 means expansion, while a score below that denotes contraction.
"August highlights another month of challenging operating conditions in the Indian services sector," the IHS Markit release said. "Sustained periods of closure and ongoing lockdown restrictions in both domestic and foreign markets have weighed heavily on the health of the industry," it added.
The muted performance by the services sector indicated a challenging road to recovery after the economy contracted nearly a quarter in April-June. India's first quarter GDP contracted by a massive 23.9 per cent, owing to coronavirus-induced lockdown.
A composite index, which measures both services and factory activity, improved to 46.0 in August from July's 37.2, cushioned by a better manufacturing performance. However, it remained well below the neutral 50.0 level.
Meanwhile, the manufacturing sector activity re-entered the growth territory in August, following the resumption of business operations. The headline seasonally adjusted IHS Markit India PMI rose from 46 in July to 52 in August, implying an improvement in operating conditions across the manufacturing sector following four consecutive months of contraction. In April, the index had slipped into contraction mode, after remaining in the growth territory for 32 consecutive months.