India’s services sector posts fastest growth in ten months on strong demand and easing costs

Robust domestic and overseas demand drove services PMI to 60.4 in June, but business optimism dipped to a two-year low

July 3, 2025

Strong domestic demand led to a sharp rise in new business, while export orders also remained resilient despite a slight deceleration

Improvements across Asian, Middle Eastern, and Western markets supported international demand

Employment in the sector continued to expand, though the pace of hiring moderated after May’s record high

Input cost inflation cooled to a ten-month low, with higher staff wages being the main expense driver

India’s services sector recorded its strongest performance in ten months in June, buoyed by resilient demand and softer cost pressures, according to the HSBC final India Services Purchasing Managers’ Index (PMI) released by S&P Global. The PMI rose to 60.4 in June from 58.8 in May, indicating a robust expansion in business activity, although slightly below the preliminary estimate of 60.7. Any reading above 50 signals growth.

A key driver behind the surge was a notable rise in the new business sub-index, which tracks demand. Companies reported continued strength in the domestic market, alongside solid export demand. While growth in international orders eased slightly from May, panellists reported that overseas business remained strong, supported by improving demand from Asian, Middle Eastern, and US markets.

This favourable demand environment supported ongoing job creation across the sector, although the rate of employment growth slowed compared to May’s record pace.

Cost pressures eased in June, with input price inflation dropping to its lowest level in ten months. Firms cited higher wages as the primary factor behind cost increases. Despite this, service providers retained sufficient pricing power to pass part of the cost burden on to clients. Output price inflation moderated in line with the sector’s historical average.

However, despite these positive trends, business sentiment weakened. The outlook for the coming year fell to its lowest level in over two years, signalling concerns about future conditions.

Complementing the strong services performance, the HSBC India Composite PMI, which tracks both services and manufacturing activity, rose to 61.0 in June from 59.3 in May, marking the sharpest expansion since April 2023. Earlier data this week confirmed that factory output growth also accelerated in June, underlining broad-based economic strength.

Source: Economic Times

Recent Articles

Modi, Milei agree to deepen India-Argentina strategic ties

July 7, 2025

Prime Minister Narendra Modi and Argentine President Javier Milei agreed …

Read More

GCCs power India’s office leasing market in FY25 with record absorption

July 4, 2025

Global capability centres (GCCs) remained the dominant force in India’s …

Read More

Modi embarks on landmark five-nation tour with focus on Global South and BRICS summit

July 3, 2025

Prime Minister Narendra Modi departed for a five-nation tour spanning …

Read More