With the coronavirus
lockdown crippling global demand, there has been a historic spike in layoffs, reinforcing fears of a deep recession in the country, the PMI survey showed.
The outlook gave little hope for an imminent turnaround with firms reporting record low levels of confidence about the next 12 months, reported Reuters.
"Given the stringency of the lockdown measures imposed in India, it is no surprise to see the severity of the declines in April and May," Joe Hayes, an economist at IHS Markit, said in a release.
"Demand for services, both domestically and overseas, continued to plummet in May as clients' businesses remained closed and footfall remains drastically below normal levels."
A composite PMI, which includes manufacturing and services, also signalled a severe contraction in Asia's third-largest economy.
"With economic output set to fall enormously in the first half of 2020, it is clear that the recovery to pre-COVID-19 levels of GDP is going to be very slow," IHS Markit's Hayes wrote, according to Reuters.