HSBC data shows steady services growth as competition intensifies, even as hiring rises and international demand improves.
Services sector remains in expansion mode
India’s services sector maintained strong growth in February, with the HSBC India Services PMI Business Activity Index coming in at 58.1, only slightly below January’s 58.5.
Any reading above 50 signals expansion, meaning the sector continues to grow at a healthy pace as the financial year approaches its close.
At the same time, new business growth moderated, marking the slowest pace of expansion since January 2025.
Competitive pressures slow new order momentum
Companies reported that new order volumes still increased sharply, but the pace cooled due to intensifying competition.
Several businesses cited:
- Higher client enquiries and marketing efforts boosting sales
- A more competitive market environment limiting the overall pace of growth
In practical terms, demand remains solid—but winning business is becoming harder.
International demand and hiring pick up
Despite softer new order momentum, export demand strengthened, supporting activity levels.
According to Pranjul Bhandari, Chief India Economist at HSBC, the sector showed resilience.
“India’s Services PMI registered 58.1 in February, signalling another month of robust expansion,” Bhandari said.
Key developments included:
- Stronger international sales
- Increased hiring to meet operational needs
- Improved business confidence
Companies are expanding their workforce to handle rising workloads, reflecting confidence in sustained demand.
Inflation pressures remain elevated
Cost pressures intensified across the sector.
Firms reported higher input costs, particularly linked to:
- Food prices
- Labour expenses
Businesses responded by passing a portion of these higher costs to customers, resulting in faster output price inflation.
The dynamic illustrates a familiar economic pattern: strong demand allows companies to maintain pricing power.
Composite PMI signals stronger private sector momentum
When combined with manufacturing data, the broader picture looks even stronger.
India’s Composite PMI rose to 58.9, indicating the fastest expansion in private-sector activity in three months.
Manufacturing momentum played a key role in lifting the overall index.
In other words, both factories and service providers are contributing to growth, reinforcing India’s economic resilience.
Finance sector leads services growth
Among the industries surveyed, finance and insurance emerged as the strongest performers.
The segment recorded:
- Fastest output growth
- Strongest expansion in new orders
Even though growth rates eased slightly, the sector remained the most dynamic among the four monitored industries.
By contrast, real estate and business services ranked lowest, though they still recorded expansion.
What it means for India’s economy
The data suggests India’s services economy remains a major pillar of growth, even as competition intensifies.
Strong demand, rising hiring, and improving confidence point to continued expansion in the coming months.
However, the slowdown in new orders highlights a subtle shift: growth is becoming more competitive and cost pressures are rising.
The key question now is whether demand momentum will remain strong enough to offset rising inflation and competition.
TL;DR:
India’s Services PMI came in at 58.1 in February, signalling continued expansion in the sector. However, new order growth slowed to a 13-month low due to rising competition. Strong international demand, increased hiring, and improved business confidence helped maintain overall momentum.
