India's services sector growth hits 6-month high in May on new orders, softer rise in cost burdens

New Delhi: India's services sector growth touched a six-month high of 59.8 in May, boosted by healthy demand conditions, new client wins, and ongoing improvements in new business intakes, a monthly survey said on Wednesday.

The seasonally adjusted HSBC India Services PMI Business Activity Index rose to 59.8 in May, from 58.8 in April, signaling the strongest rate of expansion since last November.

The HSBC India Services PMI Business Activity Index is based on a single question asking how the level of business activity compares with the situation the month before.

In the Purchasing Managers' Index (PMI) parlance, a print above 50 means expansion, while a score below 50 denotes contraction.

"India's services PMI signalled an expansion in business activity in May, supported by a continued rise in new business. External demand for India-provided services also grew at a faster pace, rebounding after a sharp decline in April. Input cost inflation eased, which in turn reduced pressure on selling prices," said Pranjul Bhandari, Chief India Economist at HSBC.

Strengthening demand for services such as freight, digital solutions, e-commerce, entertainment and IT reportedly boosted new business growth during May. As a result, companies lifted activity to a greater extent and continued to add to payroll numbers.

However, growth of external demand remained below the 2025 average, the survey said, adding that the expansion in international orders was nevertheless solid, with firms citing gains from Australia, Canada, France, Germany, Hong Kong, Malaysia, the UAE and the UK.

On the prices front, input prices across the service economy continued to increase at an above-trend pace during May. Survey participants reported having paid more for food, fuel, gas, labour and materials compared to April.

In terms of jobs, Indian services companies signalled a further increase in payroll numbers. The overall rate of job creation was solid and the second-fastest in just under a year (behind April), but fewer than 7 per cent of panelists signalled greater hiring, and the vast majority indicated no change in headcounts.

Regarding the 12-month outlook for business activity, services firms expect demand conditions to remain favorable and therefore support output. The overall level of confidence slipped to a three-month low and was below the historical trend.

Meanwhile, the HSBC India Composite PMI Output Index continued to recover from March's slowdown, rising from 58.2 in April to 59.3 in May.

Composite PMI indices are weighted averages of comparable manufacturing and services PMI indices.

New orders placed with private sector companies rose at the quickest pace in six months, and the aggregate selling prices rose at the weakest rate since January.

The HSBC India Services PMI is compiled by S&P Global from responses to questionnaires sent to a panel of around 400 service sector companies.