The country’s services sector activity dropped to a three-month low of 52.3 in December but remained in the expansion zone .

However, hiring came to a halt as the resurgence in coronavirus infections weighed on new business and employment, a private survey has showed.

The seasonally adjusted India Services Business Activity Index fell from 53.7 in November to 52.3 in December.

The index was above the critical-50 mark that separates growth from contraction for the third month in a row during December but pointed to the slowest pace of expansion in the three months till December.

“The news that the services sector remained in expansion mode during December is welcome but the fact that growth lost momentum yet again should not be disregarded,” said Pollyanna De Lima, economics associate director at IHS Markit.

Companies indicated that growth was supported by new work, though curbed by competitive pressures and the Covid-19 pandemic, the survey noted.

Global Covid-19 restrictions, particularly travel bans, restricted international demand for Indian services at the end of 2020.

“A spike in Covid-19 cases was reported as a key factor restricting growth of new work among service providers, which in turn curbed the rise in output and led to increased business uncertainty about the outlook,” Lima noted.

On the employment front, staff hiring came to a halt because of liquidity concerns, labour shortages and subdued demand, while business optimism faded.

“Given the damaging impact of the pandemic on the service economy, some companies are facing financial difficulties, which is preventing staff hiring. December saw the ninth round of job shedding in 10 months,” Lima said.