India's services sector activities dropped into contraction terrain for the first time in eight months, amid renewed decline in new work intakes due to the escalation of the pandemic and the reintroduction of restrictions, a monthly survey said on Thursday.

The seasonally adjusted India Services Business Activity Index fell to 46.4 in May, down from 54.0 in April, as the intensification of the COVID-19 crisis caused renewed declines in new business and output. In PMI parlance, a print above 50 means expansion while a score below 50 denotes contraction. "The intensification of the COVID-19 crisis and associated restrictions suppressed domestic and international demand for Indian services.

Total sales decreased for the first time in eight months, while the fall in external orders was the most pronounced since last November," said Pollyanna De Lima, Economics Associate Director at IHS Markit. International demand for Indian services also worsened, with new export business falling at the quickest rate in six months.

The drop was attributed to international travel restrictions and business closures. On the job front, pandemic-related worries and falling sales led services companies to reduce workforce numbers again during May.

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