By Anant Vijay Kala

NEW DELHI--A gauge of services activity in India contracted for the second-successive month in December, as a cash shortage in the South Asian economy pulled down new orders to the weakest level in more than three years.

The seasonally adjusted India Service Sector Business Activity Index stood at 46.8, little changed from 46.7 in November, but well below the 50 mark that separates expansion from contraction, according to survey results released by IHS Markit and Nikkei Wednesday.

"The Indian service economy ended 2016 on a grim note, with the average PMI activity index reading for the Oct-Dec quarter the lowest since early 2014," Pollyanna De Lima, an economist at IHS Markit said in a statement.

The survey findings will deepen concerns of a sharp slowdown in Asia's third-largest economy as it reels under a prolonged shortage of currency triggered by the government's move in November to withdraw overnight 86% of bank notes in circulation.

Findings of a similar survey released Monday showed activity in the manufacturing sector also plunged, contracting for the first time in an year in December.

"Combined with the manufacturing PMI, data suggest that Indian [gross domestic product] is set to grow in [Oct-Dec], but a slowdown is likely," Ms. De Lima said.

Write to Anant Vijay Kala at anant.kala@wsj.com

(END) Dow Jones Newswires

January 04, 2017 00:33 ET (05:33 GMT)

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