India’s services sector witnessed strong expansion in February 2025, supported by rising domestic and international demand, as per the HSBC India Services Purchasing Managers' Index (PMI) compiled by S&P Global. The PMI increased to 59, up from 56.5 in January, marking 43 consecutive months above the neutral 50-mark, which indicates sustained growth.

The services sector is a key driver of India's economy, contributing significantly to GDP, employment, and exports. February's growth was fueled by higher new orders, leading to increased output and hiring. The sector also benefited from robust external demand, with international sales from Africa, Asia, Europe, the U.S., and the Middle East rising at the fastest pace in six months.

Domestic & Global Demand Fuel Expansion

The primary force behind February's PMI surge was stronger demand, both in domestic and global markets. New orders increased sharply, indicating a growing appetite for Indian services, ranging from IT and business outsourcing to financial and professional services.

International demand played a crucial role, with exports of services witnessing a sharp uptick. Indian companies saw a steady rise in inquiries and contracts from major global markets, reinforcing India’s position as a service-driven economy.

Employment Surges as Businesses Expand

To accommodate this rising demand, Indian service firms hired at one of the fastest rates since December 2005. The sector added both full-time and part-time employees, reflecting business confidence in sustained growth. This hiring spree highlights the resilience of India's workforce and the capacity of businesses to scale operations efficiently.

While business confidence remained optimistic, it showed a slight decline compared to August 2024, likely due to global uncertainties and inflation concerns. However, companies continued to invest in staffing and productivity improvements, ensuring sustained momentum in the sector.

Inflationary Pressures Ease, Keeping Prices Stable

Despite the rising cost of operations, inflation slowed to a four-month low, allowing companies to maintain stable output prices. This stability is crucial, as it supports consumer spending and business investment, preventing abrupt price shocks in the market.

Chief India Economist at HSBC, Ms. Pranjul Bhandari, highlighted that global demand was a major catalyst for India’s services growth. She emphasized that the sector's resilience and strong order inflows reinforce its role in India’s overall economic expansion.

Outlook for India’s Services Sector

The strong momentum in February suggests that India’s services sector will remain a key pillar of economic growth in 2025. With robust hiring trends, rising international demand, and stable inflation, businesses are expected to expand further in the coming months.

However, potential risks such as global economic fluctuations, currency movements, and inflationary pressures remain factors to watch. Despite these challenges, the positive outlook and continued investments in the services industry indicate sustained long-term growth for India’s economy.

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