India's services sector grows at fastest pace in 10 months
What's the story
India's services sector witnessed its strongest growth in the last 10 months in June, driven by strong demand and easing price pressures. The HSBC India Services Purchasing Managers' Index (PMI) rose to 60.4 from May's 58.8, marking a significant increase but slightly lower than the preliminary estimate of 60.7. A PMI above 50 indicates expansion while below that signals contraction.
Demand surge
Asian, Middle Eastern and US markets were key contributors
The new business sub-index, a key indicator of demand, saw a sharp rise as companies benefited from sustained domestic market strength. This was coupled with robust export order growth, albeit at a slightly slower pace than in May. The Asian, Middle Eastern and US markets were key contributors to this overseas demand improvement.
Employment trends
Job creation continues in services sector
The strong demand in the services sector has led to continued job creation, although at a slower pace than the record-high seen in May. On the pricing front, input cost inflation across the sector eased to a 10-month low in June. Companies cited higher staff wages as a significant source of increased expenses.
Pricing power
Output price inflation eases; business outlook weakens
Firms in India's services sector have enough pricing power to pass on some of the cost load to their clients. The output price inflation eased from May and was in line with historical averages. However, despite these positive indicators, the business outlook for 2026 has weakened to its lowest level in over two years.
Composite growth
Composite PMI rises to 61 in June
The HSBC India Composite PMI, which combines services and manufacturing activity, rose to 61 in June from May's 59.3. This marks the fastest expansion in the last 14 months. The manufacturing PMI data released this week also showed an acceleration in factory activity growth for June, further complementing the strong performance of the services sector.