India’s Services Sector Growth Remains Steady in May Driven by Strong Demand: PMI

HSBC India Services PMI Sees Notable Growth in May

In May, the seasonally adjusted HSBC India Services PMI Business Activity Index reached 58.8, a slight increase from April’s figure of 58.7, indicating a sustained vigorous expansion in the sector. The report published on Wednesday highlighted that the Indian services industry maintained robust momentum, bolstered by strong demand conditions, acquisition of new clients, and enhanced staffing capabilities. With a PMI score above 50 indicating growth, May’s reading demonstrates continued expansion.

Pranjul Bhandari, Chief India Economist at HSBC, noted, “India achieved a services PMI of 58.8 in May 2025, consistent with the stable trends observed in recent months. The surge in international demand played a critical role in sustaining this growth, particularly illustrated by an increase in the new export business index compared to April.”

Strong New Orders Drive Growth

The survey revealed that new orders increased sharply, primarily fueled by robust advertising efforts, strong demand, and repeat business from existing customers. Companies reported a notable rise in international demand for their services in May, with significant growth in new export orders from Asia, Europe, and North America.

“To meet the rising demand, service providers in India significantly ramped up recruitment efforts. The employment index reached an all-time high in the history of this survey,” stated Bhandari. Nearly 16% of surveyed companies reported an increase in their workforce, while only 1% noted a reduction. “This resulted in an unprecedented rate of job creation,” the survey added.

Cost Pressures and Business Sentiment Improvement

The increase in employment, alongside overtime compensation, contributed to rising operational costs for firms. Several businesses also mentioned higher expenses related to cooking oil, materials, and meat products. Concurrently, indicators of input costs and output charges showed significant inflation, with increases surpassing historical average rates in both areas.

Positive business sentiment was observed in May, and revised forecasts arose from expectations that increased staffing, a broader customer base, and enhanced marketing strategies would propel growth in the upcoming year. Moreover, the HSBC India Composite PMI Output Index stood at 59.3 in May, only slightly down from 59.7 in April, reflecting continued strong aggregate activity. The decline in the headline index was attributed to a more moderate growth rate in factory output, while services activity accelerated.

Record Employment Growth Across Sectors

Improving demand for Indian goods and services led to record job creation across both sectors, resulting in an extraordinary pace of overall employment growth. The HSBC India Services PMI is compiled by S&P Global, based on responses from approximately 400 service sector firms across various industries, including consumer services (excluding retail), transportation, information technology, communication, finance, insurance, real estate, and business services.