India’s services sector activity surged to an 11-month high in July 2025, underpinned by strong international demand and solid domestic sales, according to the HSBC India Services Purchasing Managers’
Index (PMI) released on August 5.
The HSBC India Services PMI, compiled by S&P Global, inched up to 60.5 in July from 60.4 in June, confounding a preliminary estimate that showed a drop to 59.8. A PMI reading above 50 indicates expansion, while below 50 denotes contraction. With the latest reading, India’s dominant services sector has now recorded expansion for four consecutive years.
Export Orders See Strongest Growth in a Year
A key highlight of the survey was the marked acceleration in the new export business sub-index, which posted its second-best reading in the past 12 months. This suggested resilient global demand for Indian services. While overall new business slightly moderated from June, it remained firmly positive, buoyed by marketing campaigns and successful client acquisitions.
Among various service categories, finance and insurance led in terms of both new order inflows and overall business activity. On the other hand, real estate and business services posted the slowest pace of expansion during the month.
Hiring Slows Despite Rising Demand
Even though demand conditions remained supportive, service sector firms significantly slowed their hiring activity in July. Employment growth dipped to a 15-month low, suggesting caution in workforce expansion despite healthy workloads.
Rising Cost Pressures May Complicate Policy Outlook
Cost pressures intensified during the month, with service providers experiencing higher expenses related to food, freight, and labour. As a result, companies increased selling prices, with the rate of output charge inflation slightly outpacing input cost inflation.
The uptick in inflationary pressures may be a key consideration for the Reserve Bank of India (RBI) ahead of its upcoming monetary policy meeting scheduled between August 4 and 6. The central bank is widely expected to maintain the repo rate at 5.50%, though a rate cut could be on the table next quarter, as per a Reuters survey.
Improved Business Sentiment
Firms expressed greater optimism about future business conditions, citing gains from digital initiatives, technology upgrades, and marketing strategies aimed at expanding their online footprint.
The HSBC India Composite PMI Output Index, which measures both manufacturing and services activity, rose marginally to 61.1 in July from 61.0 in June. This marked the strongest pace of expansion since April 2024.
