The services sector’s output continues to contract, though at a slower pace, according to an HSBC India survey. The latest reduction was the tenth in as many months.

The HSBC Business Activity index rose to 48.5 in April from 47.5 in March, the survey, which was released on Tuesday, showed. According to survey participants, a difficult economic climate, combined with the elections and a further drop in new orders contributed to the latest fall in business activity.

Together with the manufacturing index, the Composite Output Index rose to 49.5 in April from 48.9 in March. This is the second consecutive month the composite index was below 50. A number under 50 shows contraction, while anything above 50 denotes an expansion in the economy.

April data indicated that business activity across the Indian private sector fell again. While manufacturing production increased at a slower rate in April, services sector output decreased further, albeit at a slower rate.

Commenting on the latest situation in the services sector, Leif Eskesen, Chief Economist for India & Asean at HSBC, said: “While the Business Activity Index improved, it remained below the water line. This points to subdued service sector activity. Meanwhile, the slight uptick in inflation readings suggests that inflation pressures are still lingering, which calls for the RBI to continue its fight against inflation.”

Services output decreased in two of the six monitored service categories – Financial Intermediation and Transport & Storage, the survey said.

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