India’s services activity improved in February as domestic and international demand climbed high, resulting in more new orders placed by Indian companies. The seasonally adjusted HSBC India Services PMI Business Activity Index climbed to 59.0 in February, recovering from a 26-month low of 56.5 recorded in January.
This showed that the services sector clocked a sharp rate of expansion exceeding its long-run average. The survey, compiled by S&P Global, showed that the sector saw a rapid expansion in output and a major surge in employment. Anecdotal evidence revealed that productivity gains, positive underlying demand, and greater intakes of new business remained the key contributors to output.
Sales climbed further in February, while the upturn stood historically strong and quicker than that seen a month earlier. The gains in international order supported this trend, while service providers reported robust demand from clients in Africa, Europe, Asia, the Middle East, and the Americas. Altogether, external sales climbed at the fastest pace seen in six months.
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Inflation Slowed Down
While firms saw that cost burdens increased during the surveying period, the rate of inflation slowed down to a four-month low. However, the rate of increase in output prices remained broadly similar to last month and therefore, stood over the long-run average.
Labour was seen as the source of cost pressures as additional recruitment, higher salaries, and overtime payments added on to the burden for firms. “The overall rate of cost inflation nevertheless receded to a four-month low and was aligned with its historical trend. The rate of charge inflation was broadly similar to January, therefore remaining above its long-run average,” the survey showed.
Employment Climbed Sharply
Indian services firms continued to push for more recruitment to accommodate for rising new business and remove capacity hindrance. Employment rose sharply and at one of the fastest rates since data collection started in December 2005. The survey found that full-time and part-time staff were brought on by the firms.
Pranjul Bhandari, Chief India Economist, HSBC, explained, “India’s services business activity index rose to 59.0 in February 2025, up considerably from January’s 26-month low of 56.5. Global demand, which grew at its fastest pace in six months according to the
new export business index, played a major role in driving output growth for India’s services sector. Meanwhile, job creation and charge inflation remained strong during February. Looking ahead, business sentiment remains broadly positive, but did slightly slip last month to its lowest level since August 2024.”
