Services sector growth touched the highest level in over three-and-a-half years, driven by new business orders amid improved market conditions. Nikkei India Services Purchasing Managers' Index (PMI), which tracks changes in activity at services sector companies on a monthly basis, stood at 54.7 in August, up from 51.9 in July, registering an expansion in each of the past 14 months. 

A reading above 50 means the sector is expanding, while a reading below that level means contraction.

The report said service sector showed upbeat levels of performance in August. New business was the main driver of activity growth, even amid increased competition for new work. 

Author of the report, Pollyanna De Lima said, the level of incoming new work rose at the quickest pace for three-and-a-half years and companies mainly linked this to improved market conditions.

Meanwhile, the trend in employment remained comparatively subdued with a slight decrease in jobs signalled for the first time since September last year.

Stronger business activity growth and incoming new work led to modest recovery in optimism at service providers. Over 27 per cent of companies expect activity to increase over the coming year.