New Delhi, Aug 3 (KNN) Following implementation of Goods & Services Tax (GST) in July this year, country’s services sector contracted and fell to its lowest level in nearly four years, showed a monthly survey today.

The Nikkei India Services Purchasing Managers' Index (PMI), a pointer to services output on a monthly basis, plunged to 45.9 in July, the lowest since September 2013, from June's eight-month high of 53.1. The July services PMI also signalled the first downturn in output since the start of this year.

"PMI data for July highlight a reversal in fortunes across India, with the economy going into the reverse mode after seeing a pick-up in growth momentum during June," said Pollyanna De Lima, Principal Economist at IHS Markit, and author of the report.

The launch of the GST was mentioned by services firms as having caused a contraction in new work, leading to lower activity.

The drop in new business inflows echoed the trend for output, being the first since January and the most pronounced in nearly four years.

Likewise, factory orders decreased in July and at the quickest pace since February 2009. Faced with fewer workloads service providers and manufacturers lowered payroll numbers in July. Rates of job shedding were, however, slight in both cases.

The seasonally adjusted Nikkei India Composite PMI Output Index -- which maps both manufacturing and services – also fell sharply to 46.0 in July, from 52.7 in June.

"Private sector activity dipped for the first time since the demonetisation shock and to the greatest extent since early 2009, mirroring the sales trend," Lima added.

Indian service providers, however, remain optimistic about the 12-month outlook. "Whereas many will question how deep an impact the GST will have on the economy in the near and long term, firms seem convinced that prospects will brighten as the new tax regime becomes clearer," Lima said.