Services sector growth dips to 11-month low in December

New Delhi: India’s services sector growth dipped to an 11-month low in December and business sentiment fell for the third straight month to its lowest level in close to three-and-a-half years, dragged by sluggish demand, as per an industry survey report released by S&P Global on Tuesday.

India’s Purchasing Managers’ Index (PMI) for services fell to 58 in December, from 59.8 recorded in the previous month. This marked the slowest pace of expansion in India’s dominant services sector since January 2025.

The PMI print above 50 indicates growth in the sector, while below 50 shows contraction. Despite the slowdown, the PMI level was still indicative of a substantial rise in output.

“While India's service 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,” said Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence.

Business sentiments retreated for the third consecutive month. The December business sentiment level was at its lowest in close to three-and-a-half years. The respective index was nearly 9 points below its long-run average. “Heightened market uncertainty and concerns around exchange rate movements dampened optimism,” S&P Global said in its monthly report, which is based on a survey conducted among around 400 firms operating in the services sector.

Sluggish expansion has impacted employment. The recent trend of hiring growth that began in June 2022 came to an end in December. Service sector jobs fell only fractionally, however, as the vast majority of companies (96%) indicated no change since November.

One factor that prevented firms from recruiting additional staff was a lack of pressure on their operating capacities. Outstanding business volumes were broadly stable in December, as was generally the case in both October and November.

“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,” De Lima said.  

Services exports rose in December. Growth in new export orders in December was higher when compared with the previous month. Services exports growth was led by strong demands in Asia, North America, the Middle East and the UK.

“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,” De Lima remarked.