The survey noted that advertising campaigns supported the increase in new work growth in the sector amid competitive pressures.
Services sector grew for the third straight month in April but the pace of growth moderated amid slower rise in new business and employment, a monthly survey said on Thursday.
The Nikkei India Services Purchasing Managers' Index (PMI), which tracks services sector output on a monthly basis, was down from 51.5 in March to 50.2 in April, indicating challenging market conditions that hampered growth.
The survey noted that advertising campaigns supported the increase in new work growth in the sector amid competitive pressures.
The Nikkei India Services Business Activity Index posted above the critical 50.0 level, which separates growth from contraction, for the third-month running in April. However, the rates of increase weakened in all the three months.
"April PMI data for the Indian service sector show how jittery the current economic environment is, igniting concerns among some businesses, despite remaining in growth territory," said Pollyanna De Lima, economist at IHS Markit and author of the report.
Indian services sector had returned to growth in February after three months of demonetisation-driven contraction.
"Slower and only marginal increases in new work and activity were seen, with these indicators close to the stagnation mark," Lima added.
Optimism of service companies for future output growth moderated as firms were cautiously optimistic towards future performance.
"The latest results indicate that the road to recovery from the notes ban is still bumpy and is a reminder that the sector is not out of the woods yet," Lima said.
Meanwhile, with the manufacturing production also losing pace, growth of private sector activity softened since March.
The seasonally adjusted Nikkei India Composite PMI Output Index was down from 52.3 to 51.3 in April, and signalled only a slight rate of expansion.
On the price front, average input cost inflation slowed from March's nine-month high amid reports of lower fuel prices partly offsetting higher transport costs arising from lorry strikes.
The Reserve Bank in its monetary policy review meet on April 6 kept the repurchase or repo rate -- at which it lends to banks -- unchanged at 6.25 per cent but increased reverse repo rate to 6 per cent from 5.75 per cent.
Photograph: Mansi Thapliyal/Reuters