Services Sector in India Reaches 10-Month High in June: HSBC PMI Report

India's services sector performance surged in June 2025, reaching its highest level in the last ten months, according to the HSBC India Services PMI Business Activity Index released on Thursday, July 3. This expansion was fuelled by strong domestic demand, a solid rise in new export orders, and continued job creation, signalling robust momentum in the country’s post-pandemic economic recovery.

The Purchasing Managers’ Index (PMI) rose from 58.8 in May to 60.4 in June, indicating a sharp improvement in overall business activity in the services sector. The threshold of 50 in PMI separates expansion from contraction.

Strong Growth in New Business Drives Services Activity

The sharp upturn in new orders was a standout feature of the June PMI report. New business rose at the fastest pace since August 2024, driven by both domestic and international demand.

Pranjul Bhandari, Chief India Economist at HSBC, said,

"The Services PMI business activity index was up to a ten-month high, led by a sharp rise in new domestic orders. New export orders also expanded, albeit at a softer pace."

Indian service providers recorded a significant boost in international sales, particularly from Asian, Middle Eastern, and U.S. markets. This indicates India’s increasing global competitiveness in key service industries such as IT, finance, and consulting.

Employment Rises for 37th Consecutive Month

One of the most encouraging aspects of the report was its findings on employment. The Indian services sector added jobs for the 37th month in a row in June, showing the resilience and growth of labour demand in the services industry.

The rate of job creation remained above the long-term average, although it slowed slightly from May’s record pace. This suggests companies are confident about future demand and are investing in workforce expansion.

Recruitment was broad-based, covering sectors like technology, consumer services, healthcare, and financial services. The job market continues to offer opportunities across skill levels, contributing to economic stability.

Composite PMI Output Index Indicates Broad Economic Strength

The HSBC India Composite PMI Output Index, which combines data from both manufacturing and services sectors, rose from 59.3 in May to 61.0 in June — its fastest pace of expansion in 14 months.

This demonstrates that India’s overall private sector is in strong health, with both industry and services benefiting from demand recovery and investment.

Input Costs and Output Prices See Controlled Inflation

Price indicators from the June PMI survey showed signs of cooling inflation pressures. Input cost inflation was moderate, especially in comparison to previous months, while the increase in prices charged by firms also slowed.

• The consumer services segment saw the most pressure in terms of cost increases.

• On the other hand, the finance and insurance segment posted the fastest growth in output prices, suggesting stronger pricing power in that category.

This balance between input and output price increases resulted in improved margins for many firms, contributing to profitability and investment confidence.

Optimism Persists but Confidence Softens

While Indian service providers remain optimistic about business prospects over the next 12 months, the survey recorded a slight dip in overall confidence.

Only 18% of companies forecasted growth, the lowest proportion since mid-2022. The drop in optimism may reflect geopolitical uncertainties, interest rate dynamics, or global economic slowdown concerns.

Nonetheless, the majority of firms still expect growth, underscoring continued resilience in the domestic economy.

Sectoral Insights from the Survey

The survey responses came from around 400 service sector companies, including businesses in:

• Information technology and software services

• Hospitality and tourism

• Education and training services

• Transport and logistics

• Banking, finance, and insurance

• Healthcare services

According to the report:

• Finance and insurance led output charge increases, hinting at strong demand for financial products.

• Consumer services faced the most intense input cost pressure, likely due to rising food, fuel, or wage costs.

• Healthcare and IT showed steady employment growth, aided by stable client demand.

International Business Trends Highlight India’s Service Strength

Global demand played a key role in June’s positive numbers. Export orders rose, although the pace was slower than domestic orders.

Middle East, Asia, and the U.S. emerged as the strongest sources of overseas demand. Indian services, especially technology services and financial consultancy, are gaining greater traction in these international markets.

This diversified export base reduces India’s dependence on a single region and makes it more resilient to geopolitical or market shocks.

What This Means for India’s Economy

The services sector makes up over 50% of India’s GDP and is a key driver of employment, exports, and innovation. The June 2025 data shows:

• Strong domestic demand is supporting growth.

• Controlled inflation is helping margins.

• Employment generation is steady, with broad-based recruitment across segments.

• Export competitiveness remains high in services.

• Business confidence, though slightly lower, continues to drive investment.

These indicators point toward robust underlying fundamentals, which should help India sustain high GDP growth in FY2025–26.

Key Takeaways from the June PMI Report

• The India Services PMI stood at 60.4, the highest since August 2024.

• New business orders saw the sharpest increase in 10 months, both domestic and export-based.

• Employment increased for the 37th straight month, surpassing long-run averages.

• Cost pressures remained manageable, allowing output prices to increase modestly.

• Optimism among service providers softened, but most firms expect growth to continue.

• The Composite PMI Output Index reached 61.0, signalling broad-based private sector growth.

Final Thoughts

The June 2025 PMI data offers a positive and reassuring picture of India’s services economy. As the country navigates global uncertainties and domestic policy adjustments, the strength of its service industries — from IT to finance, healthcare to logistics — remains a pillar of resilience.

With continued demand, strong employment trends, and stable pricing, India’s service sector is well-positioned to support overall economic growth, create new jobs, and contribute meaningfully to the nation’s development ambitions.

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