India’s services sector continued to expand in December but at a slower pace, with growth in new business and overall activity easing to their weakest levels in nearly a year, according to the latest purchasing managers’ index (PMI) survey released on Tuesday.
The seasonally adjusted HSBC India Services PMI Business Activity Index declined to 58.0 in December from 59.8 in November, marking the slowest expansion since January. In PMI terms, a reading above 50 indicates expansion, while anything below that threshold signals contraction.
“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,” says Pollyanna De Lima, economics associate director at S&P global market intelligence. "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."
"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. Notably, against the wider trend of slowing growth, services exports rose to a greater extent in December," she added.
Despite the moderation, the PMI remained comfortably above its long-term average, underscoring that the services sector continued to perform strongly even as momentum softened towards the end of the year. Survey respondents indicated that growth in incoming new work and output lost some steam, prompting firms to hold back on fresh hiring during the month.
According to the survey compiled by S&P Global, demand conditions remained broadly supportive, aided by competitive pricing and steady client interest. However, companies pointed to intensifying competition, including the availability of cheaper alternative service providers, as a factor constraining faster growth.
"Panel member reports indicated that increases in new orders and output were supported by competitive pricing, demand buoyancy and positive client interest. Anecdotal evidence suggested that growth was constrained by a greater presence of alternative providers and cheaper services offered elsewhere," the report says.
External demand offered some relief, with services exporters reporting a further improvement in overseas orders. Survey participants cited higher demand from Asia, North America, the Middle East and the UK, leading to a marked rise in new export business even as domestic growth slowed.
On the cost front, companies reported only mild increases in input expenses and output charges. Inflationary pressures remained below long-run averages, providing some comfort to businesses. Ms De Lima notes that a benign inflation environment could help services companies remain competitive, restrain price increases and support sales growth and job creation in the months ahead.
That said, overall business confidence weakened further. While companies continued to expect an improvement in activity in 2026, sentiment slipped for the third consecutive month to its lowest level in about three-and-a-half years. Respondents flagged heightened market uncertainty and concerns around exchange rate movements as key risks to the outlook.
The survey also highlighted a broader slowdown across the private sector. The HSBC India Composite PMI Output Index, which tracks combined activity in manufacturing and services, fell to 57.8 in December from 59.7 in November, the weakest reading since January 2025. Goods-producers as well as service-providers contributed to the softer performance.
At the composite level, job creation stalled during the month, reflecting slower growth among manufacturers and marginal job shedding in services. Nonetheless, private sector companies remained optimistic overall, even as confidence dipped to a 41-month low. Concurrently, 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," the report says.
The December PMI readings point to a services sector that remains resilient but is entering the new year with more measured growth expectations amid global uncertainty and currency-related concerns.
