India’s services sector remains on downslide: HSBC study

India's services sector continues to battle a slump, according to an HSBC survey released today.

The month of April continued to be poor for the sector, as new orders came in at a much slower pace. This rippled into firms reining in hiring plans, the HSBC Services Purchasing Managers' Index said.

The index, based on a survey of around 400 companies, fell to 50.7 last month, its lowest since October 2011 and the weakest reading in the current expansion cycle. The index stood at 51.4 in March.

April was the third straight month of decline, and took the index dangerously close to the 50-mark that separates growth from contraction.

Services make up almost 60 per cent of India's economy. The slowdown in the services sector will not help the Indian government, struggling to shore its finances amid a slowdown in manufacturing as well as an almost unmanageable current account deficit.

The HSBC business index, which rose to an 18-month high in January, fell for the third straight month to 52.6, its lowest since November 2011.

"Activity in the service sector decelerated further in April led by slower growth in new business. This led to a slowdown in employment growth," said HSBC economist Leif Eskesen.

Overseas demand for Indian services has taken a hit from the downturn in the euro zone, which could add to exporters' problems and slow new outsourcing deals for Indian software companies.

A similar survey last week showed India's factories lost momentum in April as output grew at its weakest pace in over four years.