India’s services sector continued its strong expansion in May, driven by robust export demand and a record pace of hiring, though inflationary pressures also picked up, according to a survey released Wednesday.
The HSBC India Services PMI, compiled by S&P Global, edged up to 58.8 in May from 58.7 in April, although it came in below the flash estimate of 61.2. The index has remained above the 50-point threshold—which separates growth from contraction—for nearly four consecutive years.
New business inflows, a key indicator of demand, rose sharply and were broadly consistent with the pace recorded in the previous three months. Firms credited this momentum to sustained advertising, favorable market conditions, and repeat clients.
International demand was especially strong, with export orders seeing one of the largest jumps in the survey’s history, which spans over a decade.
In response, service providers increased hiring at the fastest pace since the survey began in 2005, with nearly 16% of businesses reporting higher staff levels.
However, this uptick in hiring contributed to a rise in operating costs. Both input and output prices grew at faster rates, surpassing long-term averages. Respondents cited increased costs for materials such as cooking oil and meat, as well as higher overtime expenses, with input price inflation hitting its highest level since January.
Rising costs could complicate monetary policy for the Reserve Bank of India, which has already cut interest rates by 50 basis points this year, with inflation currently below its 4% target. A Reuters poll suggests another 25 basis point cut, to 5.75%, is likely at the RBI’s meeting on Friday.
Despite cost pressures, business sentiment rebounded from April’s near two-year low. Firms expressed confidence in future growth, underpinned by expanding workforces, growing customer bases, and continued marketing efforts.
The broader HSBC India Composite PMI—which covers both services and manufacturing—dipped slightly to 59.3 in May from 59.7 in April, but still signaled solid private sector growth.
