India Services Sector Growth Eases in December as PMI Slips to 11 Month Low

Business Activity Moderates at Year End​

India’s services sector saw a moderation in growth during December, with expansion in new business and output slowing to the weakest pace in nearly a year. Companies also held back on fresh hiring, reflecting a more cautious stance as the year closed.

The seasonally adjusted HSBC India Services PMI Business Activity Index declined to 58.0 in December from 59.8 in November. This marked the slowest expansion since January, though the reading remained well above the 50 threshold that separates growth from contraction.

Sentiment Weakens Despite Expansion​

While services firms continued to report expansion, overall business confidence softened further. Growth sentiment dropped to its lowest level in almost three and a half years, even as companies stayed broadly positive about future prospects.

According to S&P Global Market Intelligence, the easing of multiple survey indicators towards the end of the year points to a moderation in momentum as the economy moves into the new calendar year.

Export Demand Provides Support​

External demand remained a bright spot for the sector. Companies reported steady improvement in overseas orders, with gains coming from Asia, North America, the Middle East and the UK. New export orders rose at a strong pace, helping offset softer domestic growth conditions.

Inflation Pressures Remain Benign​

On the cost front, the survey highlighted mild increases in input costs and output charges. The relatively benign inflation environment was seen as supportive for competitiveness, allowing firms to limit price increases while sustaining sales activity and employment potential.

Confidence Tempered by Market Uncertainty​

Services companies remained confident of higher business activity in 2026. However, positive sentiment declined for the third consecutive month, reaching its lowest level in nearly three and a half years. Firms cited heightened market uncertainty and concerns around exchange rate movements as key factors weighing on outlook.

Despite recent weakness in the rupee raising import costs, exporters appeared to benefit from improved competitiveness. Services exports expanded more sharply in December, bucking the broader trend of slowing growth.

Composite PMI Signals Broad Based Cooling​

Private sector output growth also eased in December. The HSBC India Composite PMI Output Index slipped to 57.8 from 59.7 in November, marking the weakest reading since January 2025. The slowdown reflected softer momentum across both manufacturing and services.

Composite PMI indices combine manufacturing and services data, with weights aligned to their respective contributions to GDP.

Hiring Stalls as Growth Slows​

At the broader private sector level, increases in input costs and output prices remained moderate. However, job creation stalled in December, with slower growth among manufacturers and marginal workforce reductions reported by services firms.

Looking ahead, private sector companies continued to expect growth, but overall optimism fell to a 41 month low, underscoring the cautious tone as businesses navigate uncertainty into the new year.