The Covid-19 pandemic continued to dent new business generation, along with output, of India's service sector in August.
However, the contraction rate has slowed than the previous months, showed the latest India Services Business Activity Index.
The index report said the lockdown restrictions also contributed to a record increase in outstanding business.
"Meanwhile, sustained revenue losses through the second quarter and increasing cost burdens led companies to raise charges for the first time since March," the report said.
The seaasonally-adjusted India Services Business Activity Index rose sharply from 34.2 in July to 41.8 in August, the highest since March, before the escalation of the global Covid-19 pandemic.
"Nevertheless, the latest reading, by coming in below the 50 neutral value again, indicated a continued decline in business activity," the report said.
According to survey's respondents, the fall in output was linked to a further weakening of demand conditions during August, while some businesses remained closed as a result of ongoing lockdown restrictions.
"The rate of contraction in output was solid overall, despite easing from the previous survey period as some firms gradually resumed operations," the report said.
"New business placed at Indian service providers fell for the sixth month running in August amid weak market demand. That said, the rate of decline was the slowest in five months."
Furthermore, deceleration in services dipped the overall the Composite Output Index in August.
Resultantly, the Composite PMI Output Index, which measures combined services and manufacturing output, rose from 37.2 in July to 46 in August, but remained below the neutral 50 level, thereby signalling a fifth consecutive decline in private sector business activity.
"The latest figure was indicative of the slowest pace of contraction in the current period of decline, however," the report said.
"The overall decline was centred on the service sector as manufacturing production increased for the first time in five months."
Additionally, the report pointed out that similar trends were evident for new orders, with growth in manufacturing partially offset a further reduction in services.