India's services PMI fell to 41.2 in June 2021 from 46.4 in May, according to data from IHS Markit.
Services Purchasing Managers' Index (PMI) of above 50 indicates expansion, while a reading of below 50 suggests contraction.
The further contraction in services PMI in June is the fastest rate of reduction since July 2020.
Composite PMI declined to 43.1 during the month, from 48.1 in May.
"Given the current COVID-19 situation in India, it was expected that the service sector would take a hit. PMI data for June showed quicker declines in new business, output and employment that were sharp but much softer than those recorded in the first lockdown," said Pollyanna De Lima, Economics Associate Director at IHS Markit.
India had experienced a fierce second wave of COVID-19, with most states imposing lockdowns and other restrictions to curb the spread of infections.
India's manufacturing PMI stood at 48.1 in June, contracting for the first time in 11 months, according to IHS Markit data released on July 1.
A Reuters poll taken around a month ago showed the job crisis may worsen over the coming year.
India's retail inflation, measured as Consumer Price Index (CPI), rose above 6 percent in May to a six-month high. Yet the Reserve Bank of India (RBI) is not expected to tighten monetary policy this fiscal year as it looks to support economic growth, Reuters reported.
