India’s Services Sector Grows At Fastest Rate In 15 Years; Driven By Strong Demand

India’s services sector expanded at its most rapid pace in 15 years during August, fuelled by strong domestic demand and an increase in international orders, according to the HSBC India Services Purchasing Managers’ Index (PMI), compiled by S&P Global.

The PMI rose sharply to 62.9 in August from 60.5 in July, marking the strongest growth since June 2010. (A PMI reading above 50 indicates expansion in the sector.)

Pranjul Bhandari, Chief India Economist at HSBC, stated, “India’s services PMI Business Activity Index reached a fifteen-year high last month on the back of surging new orders.”

The survey revealed that new business expanded for the forty-ninth consecutive month, reaching its fastest pace in over 15 years.

This was largely supported by a pickup in overseas demand, with export orders growing at the quickest rate in 14 months.

Increased orders from clients across Asia, Europe, the Middle East, and the United States contributed to this upturn, signalling India’s growing importance in the global services market.

Inflation and Cost Pressures

Robust demand enabled many firms to pass on rising costs to customers more aggressively.

Output price inflation climbed to its highest level since July 2012, while input costs rose at the fastest pace in nine months, according to news agency Reuters.

The report attributed much of the price pressure to higher labour costs, including salary increases and overtime payments.

Overall inflation, which had eased to an eight-year low of 1.55% in July, may have bottomed out and could begin to rise again in the near term.

Business confidence improved, hitting a joint five-month high as firms reported increased advertising budgets and favourable demand forecasts.

However, despite the surge in orders, hiring growth remained modest. Companies predominantly opted for part-time recruitment over full-time hiring, reflecting a cautious approach amid uncertain economic conditions.

Composite PMI Reflects Broad-Based Growth

The Composite PMI, which combines services and manufacturing data, climbed to 63.2 in August from 61.1 in July—its highest in 17 years—indicating strong economic momentum across both sectors.

This robust performance aligns with official data that showed India’s economy grew 7.8% in the previous quarter.

Despite the positive outlook, concerns remain. Reuters reports that the Trump administration’s recent 50% tariff on Indian exports poses a risk to sustaining the current pace of growth in the coming quarters.

Policymakers and industry leaders will be monitoring this development closely.

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