Though business optimism has inched higher to a one-year high, there has been again a weak growth reported for the services sector. For the August month, services activity PMI has slowed to 52.4 in comparison to a year high number for the July month at 53.8. The level above 50 indicates expansion as against contraction.

"The weaker PMI readings for India's service sector match the trend noted in the manufacturing industry, bringing unwelcome news of a cooling economy halfway through the second quarter of fiscal year 2019/20," said Pollyanna De Lima, principal economist at IHS Markit.

Also, a new business sub-index that reflects the demand in the services sector slowed to a 3-year high in July of 53.9 versus 51 in the last month, highlighting slow hiring as well.

Further, the demand weakened even as the input price inflation has decreased but the companies have been increasing their price at the fastest rate since 2018.

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