India's services growth hits six-month high on domestic demand

India's service sector expanded at its fastest pace in six months in May, supported by healthy demand, client wins and improvements in new business intakes, according to a private survey released Wednesday.

The HSBC India Services Business Activity Index rose to 59.8 in May from 58.8 in April. A reading above 50 indicates expansion, while one below that signals contraction.

"India's services PMI signalled an expansion in business activity in May, supported by a continued rise in new business," said Pranjul Bhandari, chief India economist at HSBC.


External demand for India-provided services also grew at a faster pace, rebounding after a sharp decline in April, she added.


Manufacturing activity also improved, with the manufacturing PMI rising to 55 in May from 54.7 in April. As a result, India's composite PMI, which combines manufacturing and services activity, increased to 59.3 in May from 58.2 in April, driven by a rise in new orders and sales.

Looking ahead, services firms remained optimistic, citing favourable demand conditions which in turn are expected to support output. However, overall confidence slipped to a three-month low and remained below its long-term average.

Export orders also rose, although at a slower pace than the average recorded in 2025. Firms cited gains from Australia, Canada, France, Germany, Hong Kong, Malaysia, the UAE and the UK.

On the cost front, input prices across the service sector continued to rise at an above-trend rate in May but eased from April. Survey respondents mentioned higher spending on food, fuel, gas, labour and materials compared with April.

"Input cost inflation eased, which in turn reduced pressure on selling prices," said Bhandari.

Demand for Indian services improved despite another increase in selling prices. The pace of charge inflation eased to a four-month low and broadly aligned with its long-run average. Firms that raised fees, only 5% of panellists, attributed the increase to the pass-through of higher operating costs.

Employment growth remained strong, recording its second-fastest pace in nearly a year after April. However, less than 7% of respondents reported increasing headcount, while the majority indicated no change.