India’s service providers ended the fiscal first quarter on a strong footing. The service sector recorded a rise in growth momentum in June with HSBC India Services Business Activity Index, or services PMI for the month accelerated to 60.4 from 58.8 in May. This was the strongest growth in ten months, fueled by robust demand and cooling price pressures.
The PMI threshold of 50.0 separates growth in activity from contraction.
Robust domestic demand, hiring drive expansion
According to the survey release, both output and new order inflows grew at their quickest pace since August 2024, supported by strong growth in international sales and continued hiring activity. “Services companies benefited most from the continued strength of the domestic market, alongside a marked increase in new export exportbusiness,” it added. Overseas demand particularly improved from the Asian, Middle Eastern and US markets, according to panel members.
Although export order growth eased to a three-month low, it remained one of the strongest recorded in the survey’s history.
Pranjul Bhandari, Chief India Economist at HSBC, said, “The Services PMI business activity index was up to a ten-month high, led by a sharp rise in new domestic orders. New export orders also expanded, albeit at a softer pace. Margins improved, as the rise in input costs was below that seen for output charges. Service providers remained optimistic about future growth, though their confidence faded a tad.”
According to the PMI release, the ongoing expansion of the Indian service sector had a positive impact on recruitmentrecruitments. “Employment rose for the thirty-seventh consecutive month in June, with the rate of job growth outpacing its long-run average despite slowing from May’s record,” it said.
Margins improve as input costs ease
On the pricing front, price pressures eased in June, with both input cost and output charge inflation softening since May. HSBC said that the rate of input cost inflation across India’s service economy eased to a ten-month low in June, and was below its long-run average. Where expenses increased, panel members commonly cited greater staff salaries and wages as the main reasons.
Finance & insurance drive growth, real estate lags
Many service providers said they were able to raise prices to cover higher costs. Although the pace of price hikes slowed from May, it was still above the long-term average. Cost pressures, the survey release said, were highest in the Consumer Services sector, while the Finance & Insurance segment saw the sharpest increase in selling prices.
In terms of sectors, data indicated that expansions in output and new orders remained broad-based during June. Finance & Insurance topped the growth rankings. For both measures, the slowest expansions were in Real EstateReal estate & Business Services, it said.