India’s service providers recorded a rise in growth momentum in April with HSBC India Services Business Activity Index, or services PMI for the month accelerated to 58.7 from 58.5 in March. This indicated a sharp and stronger expansion in service sector output. A reading above 50 signals sector expansion, while a reading below 50 indicates contraction, and 50 reflects no change. The headline figure was above its long-run average of 54.2.
Pranjul Bhandari, Chief India Economist at HSBC, said, “India services activity rose at a faster pace than last month. New export orders gained momentum after taking a breather in March, accelerating at its fastest pace since July 2024. Margins improved as cost pressures eased and prices charged rose at a faster pace. Though firms remained optimistic about future growth, their confidence waned slightly.”
After experiencing a slowdown in March, business activity in the Indian service sector grew slightly in April. This regained momentum, per the S&P Global survey, was largely driven by a quicker increase in new order inflows, which also underpinned a faster expansion in employment. Alongside this positive trend, capacity pressures continued to build, with unfinished work rising solidly.
“The overall expansion in output was fuelled by a significant rise in new business intakes, the joint-best in eight months, with many firms noting favourable demand conditions and successful marketing efforts. In some instances, efficiency gains reportedly enabled companies to take on more work,” the PMI release stated.
On the pricing front, average charges increased at a quicker pace, despite cost pressures retreating to a six-month low.
In terms of sectors, consistent with trends from the previous survey period, the Finance & Insurance sub-sector exhibited the highest growth rates for both output and new orders.
Further, new export orders expanded at the fastest pace since July 2024. The S&P Global report maintained that the Indian companies continued to benefit from improved international demand for their services, with Asia, Europe, the Middle East and the US particularly cited as sources of strength.
Pranjul Bhandari, Chief India Economist at HSBC, said, “India services activity rose at a faster pace than last month. New export orders gained momentum after taking a breather in March, accelerating at its fastest pace since July 2024. Margins improved as cost pressures eased and prices charged rose at a faster pace. Though firms remained optimistic about future growth, their confidence waned slightly.”
Now in terms of employment generation, Indian services companies increased their workforce for the thirty-fifth consecutive month in April. Moreover, it added, the pace of job creation was marked and quicker than in March. Anecdotal evidence indicated that panellists enhanced operational capacity with full- and part-time employees to capitalise on increased client demand. However, despite the rise in staffing levels, firms reported another monthly increase in unfinished work with the rate of backlog accumulation accelerating from the previous month and outpacing its long-term average.
Input prices rose moderately and at the slowest pace for six months at the start of the FY26. Panellists noted greater chemical, cosmetic, fish, staff and transportation costs. They nevertheless reported lower vegetable prices. As a response to this, services firms increased their average selling prices during April, seeking to transfer cost burdens to clients. The rate of charge inflation was solid, faster than in March and above its long-run average. In terms of sectors, cost pressures were faced highest among Consumer Services companies, despite a slowdown since March, but it was in the Finance & Insurance segment that the fastest rate of charge inflation was registered.
Going forward, although service providers expressed optimism regarding activity growth, they downgraded expectations. “The overall level of business confidence was at its lowest in close to two years. Advertising, demand strength and productivity gains underpinned upbeat forecasts, which were nevertheless dampened by competition concerns,” the survey report concluded.