India's services sector activity expanded at a slower pace in December as rates of growth in sales eased to a three-month low and staff hiring came to a halt amid weak business optimism, a monthly survey said on Wednesday. The seasonally adjusted India Services Business Activity Index fell from 53.7 in November to 52.3 in December.

"Although the news that the service sector remained in expansion mode during December is welcome, the fact that growth lost momentum yet again shouldn't be disregarded," said Pollyanna De Lima, Economics Associate Director at IHS Markit.

Companies indicated that growth was supported by the securing of new work, though curbed by competitive pressures and the COVID-19 pandemic, the survey noted. "A spike in COVID-19 cases was reported as a key factor restricting the growth of new work intakes among service providers, which in turn curbed the rise in output and led to increased business uncertainty about the outlook," Lima noted.

On the employment front, staff hiring came to a halt due to liquidity concerns, labour shortages and subdued demand, while business optimism faded. "Given the damaging impact of the pandemic on the service economy, some companies are facing financial difficulties, which is preventing staff hiring. December saw the ninth round of job shedding in ten months," Lima said. A pick-up in input cost inflation was witnessed, the strongest since February.

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