India’s services sector witnessed accelerated growth in February, driven by rising domestic and international demand, an uptick in new business orders, and strong employment trends, according to the latest HSBC India Services PMI. The Purchasing Managers’ Index (PMI) for services rose to 59.0, up from January’s 26-month low of 56.5, signaling robust expansion in business activity.
The increase in services output remained well above the long-run average, supported by higher productivity and strong market demand. February saw a faster pace of new orders compared to the previous month, with improved international demand boosting the sector. Service providers reported stronger exports from key markets, including Africa, Asia, Europe, the Americas, and the Middle East, helping ease capacity pressures.
Employment in the services sector continued to rise, with firms hiring at one of the fastest rates since data collection began in December 2005. Both full-time and part-time staff were recruited, reflecting business confidence in sustained economic growth.
Despite rising hiring costs and higher expenses on food, materials, and packaging, cost inflation eased to a four-month low, aligning with historical trends. However, the rate of increase in selling prices for goods and services was the highest in three months, as businesses passed additional costs onto customers.
The broader economy also experienced stronger private sector growth, as indicated by the HSBC India Composite Output Index, which tracks both manufacturing and services. The index rose from 57.7 in January to 58.8 in February, driven mainly by the services sector, even as manufacturing growth slowed.
Despite solid hiring trends, backlogs of work continued to rise, suggesting that demand still outpaced companies’ processing capacities.
Commenting on the sector’s performance, Pranjul Bhandari, Chief India Economist at HSBC, said, “India’s services business activity index rose to 59.0 in February 2025, a significant jump from January’s 26-month low of 56.5. Global demand, which grew at its fastest pace in six months according to the new export business index, played a key role in driving output growth.”
Bhandari also noted that job creation remained strong, and businesses continued to increase prices to offset inflationary pressures. However, while overall business sentiment remained positive, it dipped to a six-month low, reflecting concerns over cost pressures and future demand.
Advertising, improved customer relations, and efficiency gains contributed to business confidence, with one-quarter of firms expecting growth over the next year. However, uncertainty about cost pressures and sustainability of demand tempered optimism.
Among key service industry segments, Consumer Services experienced the highest cost pressures, while Transport, Information & Communication firms saw the sharpest rise in selling prices.
-ANI
