India’s services sector saw a slower but still strong expansion in October, according to the HSBC India Services PMI survey. The seasonally adjusted Business Activity Index dipped to 58.9 from September’s 60.9, marking the slowest growth rate since May.
However, the figure remained well above the neutral 50.0 threshold, signalling continued expansion in the sector. The survey was compiled by S&P Global.
Businesses attributed the growth to steady demand, greater client footfall and relief from Goods and Services Tax (GST) measures. Yet, factors such as stiff competition and heavy rainfall in several parts of the country tempered the pace of growth.
Despite this moderation, service providers remained optimistic about the year ahead, expecting business activity to rise in line with strong demand conditions.
Demand Resilient but Competitive Pressures Bite
New business inflows grew sharply but at their weakest pace in five months, reflecting the impact of heightened market competition and adverse weather conditions, including floods and landslides.
Firms also noted that international demand continued to rise, though external sales growth was the slowest since March.
With GST reforms offering some respite, the rise in input costs eased considerably. October recorded the weakest increase in operating expenses in 14 months, while output prices rose at the slowest rate in seven months.
Less than 5 per cent of surveyed firms reported higher charges, indicating that many companies were cautious about passing on costs to customers amid competitive pricing pressures.
“India’s services PMI softened to 58.9 in October, which represented the slowest pace of expansion since May. Competitive pressures and heavy rains were cited as contributors to the sequential slowdown. That said, the services PMI is still running well above the neutral level of 50.0 and its long-run average,” said Pranjul Bhandari, Chief India Economist at HSBC.
Hiring and Confidence Stay Firm
Employment in the services sector rose modestly during October, extending the current streak of job creation. Companies reportedly hired staff to manage new business volumes and meet delivery targets. However, the rate of hiring was only slight and matched July’s 18-month low. Even so, the increase in staff numbers supported a marginal decline in outstanding business volumes, the first such reduction in nearly four years.
Service providers continued to project strong optimism for the year ahead. Firms cited advertising, increased client enquiries and competitive pricing strategies as key drivers for future growth. Nonetheless, the overall level of confidence slipped to a three-month low as businesses weighed weather disruptions and competition against sustained demand.
Composite PMI Reflects Broad-Based Moderation
The HSBC India Composite PMI, which combines manufacturing and services data, also reflected a slight cooling in overall private-sector growth. The index fell from 61.0 in September to 60.4 in October, the softest increase since May. The slowdown was largely attributed to the moderation in services activity, even as manufacturing posted stronger gains.
Input costs across India’s private sector increased at their weakest rate since August 2024, led by slower rises among both goods producers and service providers. Although output charges continued to rise at an above-trend pace, the latest increase was the mildest since June.
“Input costs notably increased at the slowest rate in 14 months, which provided some relief for firms. Meanwhile, India’s composite PMI fell on a sequential basis from 61.0 in September to 60.4 last month, largely due to the slowdown in the services sector,” Bhandari added.
