India’s services sector activity slowed to its weakest pace in 11 months in December, as new business growth eased and hiring stalled, according to the latest HSBC survey.
The slowdown comes on the heels of the manufacturing sector, which saw its weakest growth in two years in December, reflecting softer demand conditions and cautious production strategies by firms.
The seasonally adjusted HSBC India Services PMI Business Activity Index, which gauges month-on-month business activity, fell from 59.8 in November to 58.0 in December, marking the slowest rate of expansion since January. Despite the decline, the reading still indicated a substantial rise in output.
“While India’s service sector continued to perform well in December, the retreat in several survey indicators as 2025 ended may suggest a moderation in growth heading into the new year,” said Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence.
A positive for the sector is the benign inflation environment. Firms facing only mild increases in expenses are better positioned to compete, limit price hikes, boost sales, and potentially create more jobs, Lima added. Companies, however, expressed concerns over market uncertainty and exchange rate fluctuations.
Survey on the impact of falling rupee value
The survey noted that while rupee weakness likely raised import costs, it may have enhanced export competitiveness. Services exports grew at a stronger pace in December, supported by competitive pricing, buoyant demand, and positive client interest. Panel members highlighted improvements in external demand, particularly from Asia, North America, the Middle East, and the UK. New export orders rose at a marked pace, faster than in November.
Despite these gains, optimism among service firms fell for the third consecutive month, reaching its lowest level in nearly three-and-a-half years. Market uncertainty and exchange rate concerns weighed on sentiment. Hiring growth, which had been on an upward trend since June 2022, came to a halt in December. Service sector jobs fell only marginally, as 96% of companies reported no change from November.
Price pressure
Price pressures remained subdued. Fees for services rose slightly in December, the weakest increase in around two years, with fewer than 3% of companies raising charges while most kept them unchanged.
Meanwhile, the HSBC India Manufacturing PMI also slowed, dropping to 55.0 in December from 56.6 in November, signalling the slowest improvement in the sector in two years, though still firmly in expansion territory.