Services sector growth slows to 11-month low in December: HSBC Services PMI

India’s services sector continued to expand in December, but the pace of growth eased to its lowest level in nearly a year as softer new business inflows and subdued hiring weighed on overall momentum, according to the latest HSBC India Services PMI survey released on Tuesday.

The seasonally adjusted HSBC India Services PMI Business Activity Index slipped to 58.0 in December from 59.8 in November, marking the weakest expansion since January. However, the reading remained well above the 50 mark that separates growth from contraction.

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Survey respondents reported that growth in new business softened to an 11-month low, constrained by increased competition and the availability of cheaper alternatives, even as demand conditions remained broadly supportive due to competitive pricing and steady client interest.

Export demand, however, remained a bright spot, with firms citing stronger inflows from Asia, North America, the Middle East and the UK.

Hiring activity stalled in December, ending a recruitment trend that began in mid-2022. Most companies reported no change in staffing levels, reflecting adequate operating capacity and stable backlogs of work.

Input costs and output charges rose at a quicker pace than in November, but inflation remained relatively benign and below long-run averages, helping firms limit price increases. Fewer than 3% of services companies raised their fees during the month.

Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence, said, “While India’s services sector continued to perform well in December, the retreat in several survey indicators as 2025 ended may suggest a moderation in growth heading into the new year.”

“What bodes well for the outlook is the benign inflation environment. If services firms continue to see only mild increases in their expenses, they should be better positioned to compete and limit price hikes, thereby boosting sales and creating more jobs,” she added.

“Companies did express some anxiety about market uncertainty and exchange rate movements. While recent rupee weakness may have driven import costs higher, it likely made exports more competitive. Notably, against the wider trend of slowing growth, services exports rose to a greater extent in December.”

Looking ahead, the report said services firms remained optimistic about business activity in 2026, but overall sentiment slipped to its lowest level in nearly three and a half years amid concerns over market uncertainty and exchange rate movements.