India’s Services Sector Sees Strong Growth In February; Hiring Surges

According to a monthly survey released on Wednesday, India’s services sector recorded significant growth in February, driven by rising domestic and global demand, leading to higher output and a sharp increase in employment.

The HSBC India Services PMI Business Activity Index climbed to 59.0 in February from January’s 26-month low of 56.5, signaling a robust expansion.

A PMI reading above 50 indicates growth, while below 50 suggests contraction.

Global Demand Boosts Output Growth

Pranjul Bhandari, Chief India Economist at HSBC, stated, “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.”

Productivity improvements and strong demand contributed to this growth, with increased international orders from Africa, Asia, Europe, the Americas, and the Middle East playing a key role.

To meet growing business demands and ease capacity pressures, Indian service providers ramped up hiring, with employment expanding at one of the fastest rates since data collection began in December 2005.

“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,” Bhandari noted.

Optimistic Outlook For The Year Ahead

Advertising, improved customer relations, efficiency gains, and strong demand conditions drove optimistic output projections for the coming year.

Approximately one-quarter of surveyed participants anticipated growth, while less than 2 percent expressed a negative outlook.

Meanwhile, the HSBC India Composite Output Index, which combines manufacturing and services data, rose from 57.7 to 58.8, reflecting steady expansion.

Payroll numbers grew at a strong pace, and cost pressures in the private sector were at their lowest since October.

The Indian economy expanded by 6.2% in the December quarter, rebounding from a seven-quarter low, though the growth was slower than the previous year.

For the full 2024-25 fiscal year, the government projects GDP growth at 6.5%, slightly above the initial 6.4% estimate but lower than the 9.2% growth recorded in 2023-24.

Despite a projected growth rate of under 7% next year, India is expected to remain the fastest-growing major economy.

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