By Siddhi Nawar
After a strong finish to 2024, India’s services sector began 2025 with a PMI of 56.5, the lowest since November 2022, according to S&P Global data. While growth momentum slowed after December’s figures of 59.3, expansion remained historically strong, and job creation continued, supported by an uptick in manufacturing activity.
India’s Services PMI in December accelerated to 59.3 from 58.4 in the previous month, revealed data from S&P Global. According to the HSBC Services PMI report, the services sector experienced reduced inflation compared to November, while robust business activity reached a four-month high, signaling strong expansion for businesses.
New Business Growth Slows Amid Intense Competition
New business intakes rose at the slowest pace since November 2023, as intense competition tempered demand despite firms offering competitive pricing. However, international sales increased at the fastest rate in five months, driven by gains from clients in Asia, Europe, the Middle East, and the Americas.
Rising Costs and Inflationary Pressures
Cost pressures remained steady, with firms largely reporting higher payroll expenses. Meanwhile, charge inflation edged up, reflecting increased operational costs. Higher food prices also contributed to an additional increase in expenses, with inflation holding steady above its long-run average.
Pranjul Bhandari, Chief India Economist at HSBC, noted, “India’s services sector lost growth momentum in January, though the PMI remained well above the 50-break-even level. While business activity and new orders eased to their lowest levels since late 2022 and 2023, respectively, new export business rebounded, aligning with official data showing strong services exports in December.”
Optimism Persists despite a Dip in Sentiment
Despite the slowdown, service providers remained optimistic about business activity over the next 12 months, citing advertising, competitive pricing, and new client inquiries as key drivers. However, overall sentiment dipped to a three-month low, aligning with the broader trend.
Steepest fall in Composite PMI since 2023
The HSBC India Composite Output Index recorded India’s private sector growth slowed in January as strong factory output was offset by weaker services expansion, falling to a 14-month low of 57.7. While sales growth eased, cost pressures remained higher for services than manufacturing, and overall inflation was steady, with rising service prices balancing a slowdown in goods inflation.
