- Services activity reached a five-month high in April.
- Domestic demand and logistics drove growth amid disruptions.
- Firms increasingly sourced from local suppliers due to global tensions.
India’s services sector entered the new financial year on a strong note, with activity levels climbing to a five-month high in April even as businesses navigated rising costs and uncertainty linked to the West Asia conflict.
Fresh demand, strong domestic consumption and robust logistics activity helped drive growth, while firms increasingly turned to local suppliers amid global disruptions.
Services PMI Climbs to 58.8 in April
According to the latest HSBC India Services PMI survey released on Wednesday, the seasonally adjusted Business Activity Index rose to 58.8 in April from 57.5 in March. The reading marked the strongest expansion since November last year.
In PMI terminology, a reading above 50 signals expansion, while a figure below 50 indicates contraction.
Domestic Demand Takes the Lead
The survey suggested that demand patterns are beginning to shift. While domestic demand remained strong, export orders softened as companies flagged the impact of the ongoing West Asia conflict and weaker inbound tourism.
Pranjul Bhandari, Chief India Economist at HSBC, said activity and new orders strengthened during the month even as overseas demand lost momentum.
According to survey participants, competitive pricing, e-commerce activity and strong demand for relocation and logistics services played a key role in boosting sales growth.
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Companies Shift Towards Domestic Suppliers
One of the more notable trends emerging from the survey was a gradual move away from international suppliers. Businesses indicated that supply chain disruptions linked to geopolitical tensions are prompting greater reliance on domestic sourcing.
The development reflects growing caution among firms as uncertainty around global trade routes and shipping continues.
Cost Pressures Still a Concern
Despite strong growth, services companies continued to face elevated operating expenses. Input cost inflation eased slightly in April but remained among the highest levels recorded since November 2024.
Firms cited rising prices of cooking oil, eggs, meat, vegetables, labour and gas, along with gas shortages, as key cost pressures.
Why Consumers Haven’t Felt the Full Impact Yet
Interestingly, companies passed on only part of the increased cost burden to customers.
Although selling prices continued to rise, the pace of charge inflation slowed to a three-month low. Bhandari noted that some firms are absorbing higher costs instead of fully transferring them to consumers.
Hiring Picks Up in the New Fiscal Year
The survey also pointed to stronger hiring activity. Companies reported recruiting more short-term workers and junior-level trainees as new business volumes increased at the start of the fiscal year.
The trend indicates that firms remain optimistic about near-term demand despite external uncertainties.
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Business Confidence Softens Slightly
Even though companies remained positive about growth over the next 12 months, sentiment weakened compared to March. Survey participants cited concerns around the West Asia conflict and rising cost pressures as factors weighing on confidence.
Composite PMI Signals Strong Overall Expansion
Meanwhile, the HSBC India Composite PMI Output Index rose from 57.0 in March to 58.2 in April. The reading signalled a historically strong pace of expansion, although the rate of growth was still among the slowest seen in nearly two-and-a-half years.
The Composite PMI combines both manufacturing and services sector activity, offering a broader snapshot of economic momentum.
India’s services sector continues to show resilience, supported by strong domestic demand and improving business activity.
