India services sector PMI rises to 59.8 in May, hits six-month high on strong demand

India’s services sector expanded at its fastest pace in six months in May, supported by strong domestic demand, higher business activity and steady hiring, according to the latest HSBC India Services Purchasing Managers’ Index (PMI) survey compiled by S&P Global. 

The HSBC India Services PMI rose to 59.8 in May from 58.8 in April, marking the highest reading since November 2025. A PMI reading above 50 indicates expansion in activity while a reading below 50 signals contraction. 

Strong demand drives business activity 

The latest data showed that service providers benefited from healthy demand conditions, new client acquisitions and rising business volumes. Companies reported strong growth in sectors such as freight, digital solutions, e-commerce, entertainment, and information technology, which helped drive new business and output growth during the month. 

“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,” the survey noted. 

New orders increased at the fastest pace in three months, supporting a stronger expansion in overall business activity. Export demand also remained positive, although growth in overseas orders was slower than the rise in total sales and below the average pace recorded during 2025. 

The survey highlighted continued strength in employment generation, with service firms increasing workforce numbers at the second-fastest rate in nearly a year. Higher staffing levels helped companies manage growing workloads and support expanding operations. 

Cost pressures ease, optimism remains 

On the pricing front, businesses continued to face elevated cost pressures due to higher expenses related to food, fuel, gas, labour and materials. However, overall input cost inflation eased to a four-month low. As a result, companies raised selling prices at a more moderate pace, with output charge inflation easing to its lowest level since January. 

The final PMI reading for May was revised upward from the preliminary estimate of 58.9, indicating stronger-than-expected momentum in the sector. 

Despite the improvement in business activity, confidence among service providers softened. Business sentiment slipped to a three-month low and remained below the long-term average, reflecting cautious optimism among firms. However, companies continued to express confidence about future growth, supported by expectations of favourable demand conditions and sustained economic activity. 

The services sector remains a key driver of India’s economic growth, and the latest PMI data suggests that domestic demand continues to support expansion despite persistent cost pressures and global uncertainties.