In November, the sector had recorded fastest pace of expansion in five months. The HSBC India Services Business Activity Index, which tracks changes in activity at Indian services companies on a month-by-month basis, stood at 51.1 in December -- down from 52.6 in the previous month, indicating a moderate expansion in business activity in December.
A score above 50 indicates that the sector is expanding, while a figure below that level means contraction. "Both activity and new orders in India's services sector expanded in December, though at lower rates compared with November," HSBC Chief India Economist Pranjul Bhandari said.
Within the services sector activity, all but the financial intermediation sub-sector saw an expansion in order books.
"In our view, growth in financial intermediation is key for funding a meaningful pick-up in economic growth," Bhandari added.
Meanwhile, staffing levels in the Indian service sector increased in December, reversing the trend recorded in the previous month.
Business confidence strengthened in December, despite slowdowns in growth of activity and new orders. The degree of positive sentiment among Indian service providers was robust overall, HSBC said.

Meanwhile, the headline HSBC Composite Output Index – that maps manufacturing as well as services sectors output – stood at 52.9 in December, down from 53.6 in November.
Private sector activity in India witnessed the 8th consecutive month of growth and was mainly driven by manufacturing output, which rose at the quickest pace in two years in December.
On price rise, Bhandari said that "inflationary pressures from both input and output prices remained modest". RBI Governor Raghuram Rajan, during the last monetary policy review in December 2014, kept interest rate unchanged, saying that a shift in stance is 'premature' but hinted that a cut may come in early 2015 if inflation continues to ease and government acts on the fiscal side.

Accordingly, the repo rate continues to be at 8 percent while the cash reserve ratio has also been retained at 4 percent.

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