India's services sector growth hits six month high in May

India’s services sector expanded at its fastest pace in six months in May, driven by robust demand, stronger business activity and a recovery in international orders, according to the latest HSBC India Services Purchasing Managers’ Index (PMI) survey released on Wednesday.According to agency reports,the seasonally adjusted HSBC India Services Business Activity Index rose to 59.8 in May from 58.8 in April, signalling a sharp improvement in operating conditions and marking the strongest expansion since November 2025. A PMI reading above 50 indicates growth in activity.
The survey highlighted that favourable economic conditions and successful client acquisitions supported higher output levels across the services sector during the month.The improvement in services activity also lifted overall private sector growth. The HSBC India Composite Output Index, which measures combined performance in manufacturing and services, increased to 59.3 in May from 58.2 in April, reflecting stronger momentum in the broader economy.New business inflows into the services sector grew at the fastest pace in six months, surpassing the rate of expansion seen in manufacturing. Survey participants attributed the rise in demand to improving market conditions and stronger customer confidence.
Export demand also showed signs of recovery after a weak performance in April. According to the survey, new export orders increased across key international markets, including Australia, Canada, France, Germany, Hong Kong, Malaysia, the United Arab Emirates and the United Kingdom.Commenting on the findings, Pranjul Bhandari said business activity in the services sector continued to strengthen in May, supported by sustained growth in new orders and an improvement in overseas demand.
"Business activity in India's services sector expanded in May on the back of continued growth in new orders. International demand for Indian services improved after a sharp decline in April," Bhandari said.Despite the strong growth momentum, firms continued to face rising input costs. Businesses reported higher expenses related to food, fuel, gas, labour and raw materials. However, the rate of input cost inflation eased to a four-month low, reducing pressure on companies to pass on costs to customers.
Consequently, output price inflation moderated, with service providers raising selling prices at the slowest pace since January. The survey noted that charge inflation remained broadly in line with historical averages.Service providers also continued to expand their workforce to meet growing business requirements. Employment growth remained robust and was the second-fastest recorded in nearly a year, although only a small share of surveyed firms reported fresh hiring during the month.
Among the sectors monitored, consumer services emerged as the strongest-performing segment, recording the fastest increases in both output and new business. The segment also experienced the sharpest rise in input costs and selling prices.The latest PMI data suggests that India's services sector remains a key driver of economic growth, supported by resilient domestic demand and improving international business conditions despite ongoing global uncertainties.

(Business Correspondent)