Services activity in India softened for the second straight month, expanding at the slowest clip since November, in May 2016 amidst sluggish demand, reflecting renewed sluggishness in Asia's third biggest economy, bolstering the case for a further interest rate cut by the Reserve Bank of India (RBI) in the near-term.

New business in the Indian services sector grew at the slowest pace since July amidst increased competition and the assembly elections in some regions, leading to only marginal job growth.

Input costs rose again, leading to a further increase in prices charged, but the rate of inflation eased. Meanwhile, the degree of optimism among services providers was the lowest since February.

A combined gauge of manufacturing and services fell to a six-month low of 50.9 in May, from 52.8 in April.

"Ongoing weakness in manufacturing and services was evident in May, with output growth losing momentum for a second straight month. Overall expansion across the two sectors was the lowest since last November, as was the case for new orders", Markit Economics said.

Commenting on the Indian Services PMI survey data, Pollyanna De Lima, economist
at Markit, which compiles the survey, said:"Ongoing weakness in manufacturing and services
was evident in May, with output growth losing momentum for a second straight month.

Overall expansion across the two sectors was the lowest since last November, as was the case for new orders. "Latest PMI numbers raise doubts about the effectiveness of economic and monetarypolicies. The gloomy growth picture will be a concern to policymakers and will raise the chances of further cuts to interest rates by the RBI. This would be supported by subdued inflationary pressures, with May data pointing to weaker increases in both costs and charges."

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