India's service sector growth dips to 11 month low in December

India’s services sector growth slowed to an 11-month low in December, while business confidence weakened for the third consecutive month, weighed down by sluggish demand and heightened uncertainty, according to an industry survey released by S&P Global on Tuesday.India’s Purchasing Managers’ Index (PMI) for services fell to 58 in December from 59.8 in November, marking the slowest pace of expansion since January 2025. A PMI reading above 50 indicates expansion, while a level below 50 signals contraction. Despite the moderation, the latest reading continued to point to a solid increase in activity in the services sector, which accounts for a major share of India’s economic 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.
Business sentiment deteriorated further during the month, slipping to its lowest level in close to three and a half years. The sentiment index fell nearly nine points below its long-run average, reflecting concerns over market uncertainty and currency volatility. The survey, conducted among around 400 services firms, noted that worries around exchange rate movements dampened optimism.The slowdown also had an impact on employment trends. The hiring momentum that had been in place since June 2022 came to a halt in December, with service sector jobs declining marginally. However, the fall in employment was limited, as about 96% of surveyed firms reported no change in staffing levels compared with November.
According to S&P Global, subdued hiring partly reflected stable operating capacity pressures. Outstanding business volumes remained broadly unchanged in December, similar to trends seen in October and November, reducing the need for additional recruitment.Despite domestic demand challenges, services exports provided some support. Growth in new export orders accelerated in December compared with the previous month, driven by strong demand from Asia, North America, the Middle East and the UK. De Lima noted that while the recent weakness in the rupee may have pushed up import costs, it likely helped improve export competitiveness.Looking ahead, a benign inflation environment could offer relief to services firms. “If services firms continue to see only mild increases in their expenses, they should be better positioned to compete and limit price hikes, thereby boosting sales and creating more jobs,” De Lima said.Overall, while India’s services sector continued to expand at a healthy pace in December, easing demand, stalled hiring and subdued sentiment point to a moderation in momentum as the new year begins, noted experts.

(Business Correspondent)