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India's services sector growth slows as demand cools
International demand for Indian services has weakened significantly

India's services sector growth slows as demand cools

Oct 06, 2025
01:04 pm

What's the story

India's services sector growth has slowed down in September, with the HSBC India Services Purchasing Managers' Index (PMI) falling to 60.9 from August's 15-year high of 62.9. The decline is mainly attributed to weaker overseas orders, although new business growth remained strong despite a slight decrease from August. However, despite this moderation, business activity remained robust and optimism for the year ahead improved to a six-month high.

Growth factors

Buoyant demand, tech investment drive robust growth

Despite the slowdown from August's multi-year high growth, business activity in India's services sector continued to expand robustly. This was the second-highest expansion in 13 months. Firms attributed this sustained growth to buoyant demand and tech investment. However, some companies did report facing challenges due to increased competition and cost-control measures.

Export challenges

Weaker overseas orders, price competition challenges

The index tracking international demand for Indian services has weakened significantly, with export orders rising at the slowest pace since March. Companies have cited price competition from overseas providers as a major factor restraining growth in foreign sales. Despite these challenges, business confidence regarding the year ahead improved to a six-month high, driven by planned advertising campaigns and expected efficiency gains.

Employment trends

Employment growth remains modest, cost pressures ease

Employment growth in India's services sector remained modest in September, with less than 5% of surveyed companies reporting new hiring. Both input cost pressures and price increases charged by service providers eased from August. Firms passed on extra costs to their consumers at the shallowest rate since March, indicating a more stable economic environment for businesses.

Overall expansion

Composite PMI indicates softer growth across both sectors

The HSBC India Composite PMI Output Index, which combines manufacturing and services, fell to 61.0 in September from 63.2. This is its lowest reading in three months but still indicates strong overall expansion. The composite figures indicate softer growth across both sectors, with slower increases in new orders and output during September.