The HSBC's Services Purchasing Managers Index (PMI) for November declined to 52.1 in November, down from 53.8 in the previous month, signalling the slowest rate of expansion in the current 13-month sequence.
The index has witnessed significant decline in the last two months after registering the fastest pace of growth in seven months in September. The index has, however, managed to be above the 50-mark which indicates expansion since November 2011.
Business activity expanded at a slower pace in November and new business also grew at a slower clip, which in both cases may partly reflect the fewer working days due to Diwali," HSBC chief economist for India and ASEAN Leif Eskesen said.
However, service providers remain optimistic about the short-term business outlook. Activity in the upcoming year is forecast to increase in line with maintained brand reputation, stronger marketing and anticipated rise in demand.
"The forward-looking business expectation index improved notably, with some respondents reporting of planned business expansion," Eskesen said.
Earlier, an HSBC survey had shown that India's manufacturing sector growth improved in November, registering the fastest pace in five months, driven by a strong pick up in new orders and improved purchasing activity.
Accordingly, the HSBC India Composite Output Index which maps both the manufacturing and services index stood at 53.2 in November, slightly down from 53.5 in October, the slowest rate of expansion in 12 months.
On prices, the report said there was persistent inflationary pressure in the Indian private sector as both input and output prices increased."Despite the reported moderation in growth, inflation held steady due to firm raw material, fuel and labour cost pressures," Eskesen said.
He further noted that "combined with the stronger growth and inflation readings from the manufacturing PMI, these numbers suggest that the RBI should be inclined to continue to hold fire (keep interest rates unchanged)".
The RBI is scheduled to announce its mid-quarter monetary policy review on December 18. RBI governor D Subbarao has resisted a widespread call for the growth-propping rate cuts for some time now, citing the elevated inflation.