India’s services sector closed 2025 on a strong yet visibly moderated footing, as softer growth in new business and output weighed on overall momentum, according to the latest HSBC India Services PMI survey.
While activity remained firmly in expansion territory, several key indicators eased to multi-month lows, signalling that the pace of growth may be cooling as the economy heads into the new year.
The seasonally adjusted HSBC India Services PMI Business Activity Index slipped to 58.0 in December from 59.8 in November, marking the slowest rate of expansion in 11 months. Even so, the reading remained well above the 50-mark that separates growth from contraction, underlining that services activity continued to expand at a healthy pace.
New Orders Grow, But at a Slower Clip
A similar trend was visible in incoming new business. The survey compiled by S&P Global revealed that new orders continued to rise at an above-trend pace, but the rate of growth eased to its weakest level in 11 months.
Survey participants attributed demand resilience to competitive pricing, buoyant underlying conditions and steady client interest.
At the same time, anecdotal feedback suggested that growth was being constrained by intensifying competition, with alternative providers and cheaper service offerings limiting firms’ ability to expand faster.
External demand provided a bright spot. Services companies reported another improvement in export orders, with respondents citing gains from Asia, North America, the Middle East and the UK. New export business rose at a marked pace and accelerated from November, bucking the broader trend of slowing domestic growth.
Business Confidence Slips to Multi-Year Low
Despite confidence that business activity will rise in 2026, overall sentiment among services firms weakened for a third consecutive month. The index measuring future expectations fell to its lowest level in nearly three-and-a-half years and stood almost nine points below its long-run average.
Heightened market uncertainty and concerns around exchange rate movements weighed on optimism, according to qualitative responses. Companies flagged volatility in the rupee as a key risk, even as some acknowledged that a weaker currency may have improved export competitiveness.
Commenting on the findings, Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence, said: “While India’s service sector continued to perform well in December, the retreat in several survey indicators as 2025 ended may suggest a moderation in growth heading into the new year.”
She added that the inflation environment remains supportive. “What bodes well for the outlook is the benign inflation environment. If services firms continue to see only mild increases in their expenses, they should be better positioned to compete and limit price hikes, thereby boosting sales and creating more jobs.”
Hiring Momentum Comes to a Halt
One of the more notable shifts in December was in employment trends. The hiring streak that began in June 2022 came to an end, with job creation stalling across the services sector. Employment levels dipped only marginally, however, as 96 per cent of surveyed firms reported no change in staff numbers from November.
Companies indicated that the lack of pressure on operating capacity reduced the need for additional hiring. Outstanding business volumes were broadly stable in December, mirroring conditions seen in October and November.
Costs Rise, But Inflation Remains Benign
Input costs increased at a quicker pace than in November, driven by higher prices for building materials, chemicals, medical supplies, salaries, vegetables and office maintenance. Despite the uptick, the rate of cost inflation was among the softest recorded in more than five years.
Output charges followed a similar pattern. Prices charged by services firms rose slightly and at one of the weakest rates seen in nearly two years. Fewer than 3 per cent of respondents reported raising their fees in December, with the vast majority leaving prices unchanged.
Composite PMI Signals Broader Cooling
The moderation was not limited to services alone. The HSBC India Composite PMI Output Index, which tracks combined activity across manufacturing and services, fell to 57.8 in December from 59.7 in November. This marked the weakest expansion since January 2025, though the index remained comfortably above its long-run average of 55.0.
Growth in new orders at the composite level softened to a 25-month low, reflecting slower momentum across both goods producers and service providers. Job creation also stalled in the private sector overall, as hiring slowed among manufacturers and services firms reported fractional job losses.
Looking ahead, private sector companies remained optimistic about growth prospects, but sentiment slipped to a 41-month low, reinforcing signs of a more cautious outlook as 2026 begins.
Taken together, the PMI data suggest that while India’s services and private sector continue to expand at a solid pace, the economy may be entering a phase of more measured growth, supported by benign inflation, resilient exports and stable demand, but tempered by rising uncertainty and intensifying competition.