January PMI indicates slowest service sector growth

India’s service sector grew at its slowest pace in over two years in January, impacted by weaker demand and a subdued increase in sales and output, according to a report by S&P Global. The seasonally adjusted HSBC India Services PMI, compiled by S&P Global, fell to 56.5 in January, its lowest level since November 2022.

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India’s services sector saw a slowdown in growth momentum in January 2025, with the HSBC India Services PMI falling to 56.5 from 59.3 in December, marking its lowest level since November 2022. New business intakes rose at the weakest pace since November 2023, impacting overall business activity. Despite the decline, expansion rates remained historically strong, and job creation accelerated, according to S&P Global.

Pranjul Bhandari, Chief India Economist at HSBC, said, “India’s services sector lost growth momentum in January, although the PMI remained well above the 50-break-even level. The business activity and new business PMI indices eased to their lowest levels since November 2022 and November 2023 respectively. That said, new export business partly countered the downtrend and continued to rebound from a dip in late-2024, in line with official data which showed India’s services exports shining in December and capturing a larger share of global trade.”

The report noted that cost burdens remained largely unchanged from December, primarily due to increased payroll expenses, while charge inflation saw a slight uptick. Many firms attributed output growth to strong demand, new business wins, and technological investments, though some faced constraints due to lower customer numbers. Intense competition also contributed to the slowdown in new business growth, which was at its weakest in 14 months.

International sales improved, with gains from clients across Asia, Europe, the Middle East, and the Americas, reaching a five-month high. The rise in new business and growing capacity pressures prompted firms to increase hiring, with recruitment of both full- and part-time employees. The job creation rate was among the highest since the survey began in December 2005. With sustained client demand, outstanding business volumes grew for the 37th consecutive month, reaching the highest level since May 2024.