Summary:
India’s services sector regained momentum in August, with the Services PMI rising to 54.1 from 53.3 in July, but growth remained near a four-year low. New business improved and services hiring reached a 15-month high, although weak demand and intense competition continued to weigh on activity. Rising operating costs also pushed service prices higher, while the Composite PMI remained at 54.3 as manufacturing activity slowed further.
India’s dominant services sector regained some momentum in August, with the HSBC India Services Purchasing Managers’ Index (PMI), compiled by S&P Global, rising to 54.1 from 53.3 in July. The reading was, however, below the preliminary estimate of 54.5 and remained marginally below the long-run average of 54.5. It was also the second-weakest reading since March 2022, highlighting the subdued pace of expansion despite the monthly improvement.
Services activity had slowed sharply from 59.8 in May to 57.4 in June and further to 53.3 in July. The August recovery was supported by stronger output and new business, although companies continued to report subdued bookings, intense competition and reduced transport operations.
New Business Growth Remains Weak
New business, the survey’s key indicator of demand, increased at a faster pace in August, helped by stronger customer demand and marketing efforts. However, growth in new orders remained the second-slowest in more than four years, with some companies citing difficult market conditions and weaker client demand.
International demand provided limited support. New export orders continued to expand at a pace broadly similar to July, with demand from markets including Australia, Japan, Singapore and the UAE contributing to the increase.
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Services Hiring Hits 15-Month High
Employment emerged as one of the stronger aspects of the August survey. Services companies increased hiring at the fastest pace in 15 months, adding workers across customer service, sales and digital operations. The stronger hiring trend indicates that businesses retain some confidence in future demand despite the subdued pace of overall activity.
Business confidence, however, remained below its long-run average for the second consecutive month. Firms were cautiously optimistic that market conditions and demand would improve.
Cost Pressures Rise as Firms Raise Prices
Cost pressures increased modestly during August. Prices charged by services companies rose at the fastest pace since March as firms passed higher operating expenses on to clients. Elevated oil prices and a weak rupee remain important risks for the broader economy, particularly by increasing input and operating costs.
Latest news: India Manufacturing PMI Falls to 5-Year Low of 52.8
Composite PMI Holds at 54.3
India’s Composite PMI, which combines manufacturing and services activity, remained unchanged at 54.3 in August. Faster services growth offset a further slowdown in manufacturing, where activity declined to a five-year low. Manufacturing employment also contracted for the first time in two-and-a-half years, while stronger hiring in services more than offset job losses in the manufacturing sector.
The services sector’s resilience is also consistent with official GDP data. India’s economy expanded 7.8% in the April-June quarter of FY27, with services among the fastest-growing segments and financial services recording double-digit growth.
