India Services Sector Records Strongest Growth Since November
India’s services sector expanded at its fastest pace in six months during May, driven by robust demand across multiple industries and a sharp increase in new business activity.
According to the latest HSBC India Services PMI Business Activity Index, the reading climbed to 59.8 in May from 58.8 in April, marking the strongest expansion since November 2025 and highlighting continued momentum in the country’s economy.
Rising Demand Fuels Service Sector Growth
Indian service providers reported stronger demand across a range of industries, including freight transportation, digital services, e-commerce, entertainment, and information technology.
New business orders increased at the quickest pace in six months, signaling a significant improvement from the slowdown experienced in March. The rise in demand helped support higher business activity and strengthened overall confidence across the sector.
Export Demand Remains Positive
International demand for Indian services also improved during May.
Although growth in new export business remained slower than overall domestic sales and below the average pace recorded throughout 2025, companies still reported increased demand from several major markets.
Key contributors included Australia, Canada, France, Germany, Hong Kong, Malaysia, the United Arab Emirates, and the United Kingdom.
Cost Pressures Continue to Ease
Input cost inflation slowed to its lowest level in four months, offering some relief for service providers.
Despite the moderation, cost increases remained above long-term historical averages. Businesses continued to face higher expenses for food, fuel, gas, labor, and raw materials compared with the previous month.
The easing in inflationary pressures helped improve operating conditions and reduced pressure on profit margins.
Selling Price Growth Slows
With cost pressures becoming more manageable, companies were able to slow the pace of price increases charged to customers.
Selling prices rose at their weakest rate since January, with only 5% of surveyed firms reporting higher fees during May.
The trend suggests that easing input costs are helping businesses maintain competitiveness while limiting the need for aggressive price adjustments.
Employment Growth Remains Strong
India’s services sector continued to create jobs during May, reflecting confidence in future demand and business conditions.
Employment growth reached its second-fastest pace in nearly a year, surpassed only by April’s performance.
However, hiring activity remained concentrated among a relatively small group of firms, with fewer than 7% of respondents reporting workforce expansion while most companies maintained stable staffing levels.
Composite PMI Signals Broad Economic Strength
The HSBC India Composite PMI Output Index, which combines both manufacturing and services activity, rose to 59.3 in May from 58.2 in April.
The increase indicates stronger overall economic growth, with both manufacturing companies and service providers reporting faster expansions in sales and output.
The data suggests that growth momentum remains broad-based across key sectors of the Indian economy.
Consumer Services Lead the Expansion
Among the monitored sectors, consumer services delivered the strongest performance.
The segment recorded the fastest growth in both new business and output while also posting the largest increases in input costs and selling prices.
Its strong performance highlights continued consumer demand and spending activity despite broader economic uncertainties.
HSBC Highlights Improving Business Conditions
Pranjul Bhandari, Chief India Economist at HSBC, said the latest data points to sustained strength in the country’s services sector.
According to Bhandari, business activity continued to expand due to rising new orders, while international demand recovered after a sharp decline in April.
She also noted that easing input cost inflation helped reduce pressure on service providers, allowing businesses to moderate price increases and maintain healthy growth momentum.
The latest PMI figures reinforce the view that India’s services industry remains a key driver of economic growth, supported by strong domestic demand, improving export activity, and moderating inflation pressures.
