The Headline Number Explained
The latest HSBC India Services Purchasing Managers’ Index (PMI), compiled by S&P Global, rose to 55.2 in September 2026. This is an increase from 54.1 in August and marks the fastest expansion in three months. In simple terms, any PMI reading above 50
signifies growth in business activity compared to the previous month. The latest figure suggests that India's dominant services sector continued to expand at a healthy clip, ending the second fiscal quarter on a high note. This growth was largely driven by a sharp increase in new orders, as domestic demand showed significant resilience.
Strong Domestic Demand Drives Growth
The key driver behind the September acceleration was robust domestic demand. Companies surveyed reported a surge in new business, the sharpest since June 2026. This was particularly evident in sectors like finance, insurance, and consumer services, which saw the strongest expansions. Businesses also pointed to increased demand for digital solutions, software, transportation, and travel. However, while domestic customers were spending, international demand showed signs of slowing. Growth in new export business eased to its slowest pace in nearly three years, suggesting companies are relying more on the local market for now.
A Cautious Take on Confidence
So, are businesses popping champagne corks? Not quite. While overall business confidence improved to a three-month high, the sentiment is best described as cautiously optimistic. According to the survey, just under 16% of the service providers polled expect to see an increase in their output over the next 12 months. The remaining majority anticipate that business activity will remain largely unchanged from current levels. This suggests that while current conditions are good, there is a degree of uncertainty about the future, which tempers outright bullishness. The outlook remains positive, but it is a measured positivity, supported by rising customer enquiries and projects in the pipeline.
Inflation and Employment Trends
Two other crucial pieces of the puzzle are costs and jobs. On the inflation front, there was welcome news. Input cost pressures on service providers eased to a 10-month low in September. This reduced the need for companies to pass on costs to customers, with selling price inflation also softening to its slowest rate since June. This easing of price pressures is a positive sign for both businesses and consumers. Regarding employment, the survey indicates that companies continued to hire in September to cope with rising order books. However, the pace of job creation was moderate and actually softened slightly compared to August, particularly in the real estate and business services sectors.
The Bigger Picture: A Mixed Quarter
While the September numbers were strong, it's important to view them in a wider context. Despite the month's uptick, the average PMI reading for the entire July-September quarter was the weakest since the quarter ending in March 2022. This indicates that while the services sector finished the quarter with momentum, the overall performance was softer than in previous periods. The combined PMI, which includes both the services and manufacturing sectors, also rose to a three-month high of 55.9, pointing to a broad-based expansion in private sector activity. However, this too reflects a quarterly average that was weaker than earlier in the year, tempering some of the excitement from the strong monthly figure.
