The Engine is Roaring
The good news is undeniable. According to the latest HSBC India Services PMI, business activity in the services sector accelerated to 55.2 in September 2026, up from 54.1 in August. This marks the strongest upturn since June and the 62nd consecutive month
of growth for a sector that forms the backbone of India's economy. The expansion is broad-based, with companies reporting increased demand for everything from digital solutions and software to travel, food, and insurance. New orders are flooding in at the fastest rate in three months, supported by resilient domestic consumption and continued, albeit slower, demand from international clients in the US, UK, and Europe. This suggests a vibrant marketplace where businesses are busy and sales are climbing, painting a picture of robust health.
But Where Are the Jobs?
Herein lies the puzzle. Despite buoyant order books and rising activity, the pace of hiring within this booming sector has eased. The same PMI report that celebrated strong growth also noted that while employment continued to rise in September, the rate of job creation was softer than in August. The slowdown was particularly noticeable among real estate and business services firms. This creates a confusing picture for job seekers and economists alike. In a typical growth cycle, a surge in demand and business activity would trigger a proportional hiring spree as companies staff up to meet new orders. The current hesitation suggests that other factors are at play, forcing companies to think differently about expansion.
Cost Pressures and Cautious Outlooks
One of the primary culprits behind the hiring slowdown is cost. While input cost inflation in the services sector recently eased to a 10-month low, companies are still grappling with higher expenses related to fuel, maintenance, software, and technology. In an environment of rising operational costs, firms often prioritise protecting their profit margins over expanding their workforce, choosing instead to make their existing staff more productive. Furthermore, while business confidence has improved, it remains subdued by historical standards. Only about 16% of service providers expect output to increase over the next year, with the vast majority anticipating no change. This underlying caution, potentially driven by global uncertainties, may lead businesses to delay long-term commitments like permanent hiring, even when short-term demand is strong.
The Productivity and Skills Mismatch
The current trend also points to a deeper, more structural shift in the economy. Companies are increasingly leveraging technology and automation to handle increased workloads without adding headcount. They are focused on 'productivity-led' hiring rather than broad-based expansion. This means getting more done with the same number of people. At the same time, the nature of jobs is changing. There is a growing demand for specialised skills, particularly in areas like AI, data analytics, and cloud computing. However, a 'skill gap' exists, where companies struggle to find candidates with the right blend of technical and business acumen. This mismatch means that even with many open positions, particularly for experienced talent, freshers and those without specialised skills may find the market challenging.
The Rise of 'Jobless Growth'?
This disconnect between output growth and job creation is often termed 'jobless growth'. While India's services sector continues to be a powerful engine for Gross Value Added (GVA), its capacity to absorb a large amount of the workforce might be changing. The resilience of domestic demand is a clear positive, keeping the economy expanding. However, if that growth doesn't translate into sufficient employment opportunities, it can lead to wider economic imbalances. The current scenario places a greater emphasis on upskilling and reskilling the workforce to meet the demands of a changing job market. For businesses, the focus is on strategic, high-impact hiring rather than simply increasing headcount. For job seekers, the message is clear: specialisation and adaptability are more critical than ever.
