Services Sector Shows Strength
Recent business activity indicators point to a healthy expansion in India's private sector. The HSBC Services PMI, a key measure of the services sector's health, rose to a three-month high of 55.2 in September 2026. A reading above 50 indicates expansion.
This growth was largely driven by strong domestic demand for financial, consumer, and digital services. While the quarterly average showed more moderate growth, the September acceleration highlights the underlying resilience of the economy, setting a strong tone for the second half of the fiscal year. This positive trend is increasingly linked to the country's sophisticated digital backbone.
The Engine Room: Digital Public Infrastructure
At the heart of India's digital transformation is its Digital Public Infrastructure (DPI), a suite of platforms including Aadhaar for identity, the Unified Payments Interface (UPI) for payments, and the Open Network for Digital Commerce (ONDC). This ecosystem has become a cornerstone of India's economic growth, with the digital economy contributing 12-14% of the GDP and projected to reach 20% within the next decade. By providing open, interoperable, and low-cost tools, DPI has spurred innovation, increased productivity, and expanded market access for businesses of all sizes, from urban startups to rural artisans. It has democratised entrepreneurial opportunities by lowering the barriers to entry.
UPI: The Economy's Circulatory System
The Unified Payments Interface (UPI) has been particularly transformative. Transaction volumes have soared, with monthly figures frequently setting new records. For instance, May 2026 saw 23.2 billion transactions worth Rs 29.9 trillion. By June 2026, there were over 55 crore UPI users. This isn't just about peer-to-peer transfers; person-to-merchant (P2M) payments now dominate, accounting for a majority of transaction volumes. This shift indicates that UPI is deeply embedded in daily commerce, from local kirana stores to large e-commerce platforms. This frictionless payment system boosts the velocity of money in the economy and brings millions of small merchants into the formal financial system, creating a digital footprint that improves their access to credit and other financial services.
E-commerce and the Rise of Quick Commerce
Digital platforms are also revolutionising retail. India’s e-commerce market was valued at around US$ 125 billion in 2024 and is projected to grow significantly. This growth is no longer confined to major cities. A significant driver is the rapid adoption in Tier-II and Tier-III cities, where a new wave of consumers is coming online. A notable trend within this space is the explosion of 'quick commerce,' which has become a multi-billion dollar market. Initiatives like the Open Network for Digital Commerce (ONDC) are further democratising the sector, connecting millions of buyers with hundreds of thousands of sellers across various platforms and expanding market access for small businesses.
The AI and SaaS Adoption Wave
Beyond payments and commerce, Indian businesses are rapidly adopting Artificial Intelligence (AI) and Software-as-a-Service (SaaS) tools to enhance efficiency and create new revenue streams. AI is being deployed in customer service, marketing, and operations, moving from a niche technology to an everyday business tool. This is particularly true for India's massive base of Micro, Small, and Medium Enterprises (MSMEs), which are leveraging vertical AI platforms for everything from GST compliance to customer support. The focus is less on building foundational AI models and more on the practical deployment of AI solutions at scale to solve specific business problems.
