India’s services sector gained momentum in October 2026, recording its strongest expansion in four months as domestic demand and new business orders accelerated.
The HSBC India Services PMI Business Activity Index climbed to 55.8 in October, compared with 55.2 in September. The increase reflects improving business conditions across the country’s services economy.
Stronger customer demand, successful marketing campaigns and new client acquisitions supported the latest expansion. However, employment growth remained subdued, while international demand showed signs of weakness.
India Services PMI Reaches Four-Month High
India’s services sector continued to expand in October, supported by stronger business activity and improving domestic economic conditions.
The latest Purchasing Managers’ Index (PMI) reading of 55.8 marked the fastest pace of growth in four months. A reading above 50 indicates expansion, while a figure below that level signals contraction.
New business orders increased at their strongest rate since June, highlighting sustained demand for services.
Companies attributed the improvement to attracting new customers, securing additional contracts and launching effective advertising campaigns.
Nevertheless, the recovery was not evenly distributed across all industries.
Financial Services Lead Business Expansion
The Finance and Insurance sector emerged as the strongest performer during October.
Businesses operating in this segment reported the fastest growth in both new orders and overall activity.
In contrast, Real Estate and Business Services experienced the slowest expansion among the four services categories covered by the survey.
Meanwhile, domestic customers remained the primary source of new business growth.
International demand weakened considerably, with new export orders increasing at their slowest pace since February 2023.
This divergence suggests that India’s domestic market continues to provide the main support for services sector growth, even as external demand loses momentum.
Service Sector Inflation Falls to Multi-Year Low
One of the most notable developments in October was the significant easing of operating cost pressures.
Input price inflation declined to its lowest level since August 2020, marking the weakest increase in more than six years.
Although some service providers reported higher expenses for electricity, wages, raw materials and transportation, overall cost increases remained relatively limited.
Selling price inflation also moderated.
Companies raised their service charges at the slowest pace since June, with fewer than 3% of surveyed businesses reporting higher selling prices.
The slowdown in price increases suggests that inflationary pressures within India’s services economy have eased considerably.
Lower operating cost inflation may also provide businesses with greater flexibility to maintain competitive prices while supporting profitability.
Employment Growth Slows Despite Stronger Demand
Despite accelerating business activity, hiring conditions remained relatively weak in October.
Employment growth slowed to its lowest pace since June, with service providers reporting only a marginal increase in workforce numbers.
This suggests that businesses remained cautious about expanding staffing levels, even as customer demand improved.
At the same time, companies continued to reduce their outstanding workloads.
Backlogs of unfinished business declined for the third time in four months, indicating that service providers were generally able to manage existing demand without substantial additional hiring.
Consequently, stronger business activity did not translate into a comparable acceleration in employment growth.
India’s Composite PMI Signals Broader Economic Strength
Growth also improved across India’s wider private-sector economy.
The HSBC India Composite PMI Output Index increased to 56.2 in October from 55.9 in September, representing the fastest expansion in four months.
The composite index combines activity across the manufacturing and services sectors, providing a broader indication of economic performance.
The latest increase suggests that private-sector output continued to strengthen, supported by improving business conditions.
Pranjul Bhandari, Chief India Economist at HSBC, highlighted the rise in the services PMI to a four-month high of 55.8 as evidence of a cautious improvement in business conditions.
Domestic Demand Supports India’s Economic Outlook
October’s PMI figures underline the resilience of India’s services economy, particularly as domestic demand continues to support business expansion.
Stronger new orders, accelerating output and easing inflation pressures provide encouraging signals for the country’s near-term economic outlook.
However, slower hiring and weaker export demand remain important challenges.
Businesses may need to see more sustained improvements in demand before significantly expanding their workforces.
Overall, India’s services sector entered the final quarter of 2026 with improving growth momentum, supported by domestic consumption and relatively moderate cost pressures.
The HSBC survey was conducted between October 9 and October 28, 2026.
