India's vital services sector experienced its slowest growth in 17 months in June, as the HSBC India Services PMI Business Activity Index revealed a significant dip driven by challenging market conditions and subdued domestic demand.
Key Points
- India's services sector growth fell to a 17-month low in June, with the HSBC India Services PMI Business Activity Index dropping to 57.4 from 59.8 in May.
- The slowdown is primarily attributed to challenging market conditions and reduced client interest for services, particularly within the domestic market.
- Despite the overall deceleration, external demand remained robust, with exports seeing the strongest rise in three months from various countries.
- Price pressures continued to cool, with both input cost and output charge inflation moderating, reaching their weakest levels since November 2025.
- Hiring activity remained stagnant as service providers found existing payroll numbers sufficient, and business confidence declined to a five-month low.
India's services sector growth fell to a 17-month low in June as challenging market conditions and reduced client interest for some services reportedly stymied total sales and output, a monthly survey said on Friday.
Several firms indicated that challenging market conditions and reduced client interest for their services dampened sales at their units, resulting in stagnant hiring activity and lower business confidence.
The seasonally adjusted HSBC India Services PMI Business Activity Index fell to 57.4 in June, from 59.8 in May, registering the weakest upturn in 17 months.
The HSBC India Services PMI Business Activity Index -- based on a single question asking how the level of business activity compares with the situation the month before – was comfortably above both the neutral mark of 50.0 and its long-run average.
Factors Behind the Slowdown
Behind the softer increase in services output was the slowest expansion in new order intakes in over two-and-a-half years.
"India's services PMI remained in expansionary territory but eased to 57.4 in June, the lowest reading in 17 months. The loss of momentum points to more challenging market conditions and weaker demand, particularly at home," Pranjul Bhandari, Chief India Economist at HSBC, said.
One area of strength seen in June was exports, with firms seeing the strongest rise for three months.
According to them, demand from clients in Australia, Belgium, Canada, Germany, Malaysia, Nepal, Oman, Qatar, Singapore, the UAE and the US improved.
"External demand held up well as overseas sales stayed robust and growth reached a three-month high," Bhandari said.
Inflation and Employment Trends
On the prices front, the rate of inflation was slight, below its long-run average and the weakest since November 2025.
"Price pressures also continued to cool, with both input cost and output charge inflation moderating as geopolitical disruptions in the Middle East began to subside," Bhandari said.
On the job front, service providers generally found that payroll numbers were sufficient for current requirements and hiring was broadly paused.
Indian services firms foresee output growth in the coming 12 months, but the overall level of positive sentiment fell to a five-month low and was below the historical trend, the survey noted.
Composite PMI Overview
Meanwhile, the HSBC India Composite PMI Output Index fell to 57.1 in June from 59.3 in May, indicating a broad-based slowdown in growth as business activity, employment and new orders across India's private sector rose at weaker rates in June, with softer expansions recorded in the manufacturing and service economies.
Composite PMI indices are weighted averages of comparable manufacturing and services PMI indices.
Weights reflect the relative size of the manufacturing and service sectors according to official GDP data.
Aggregate sales volumes rose at the weakest pace in three months, while job creation slipped to its softest in 2026 so far.
Concurrently, external orders expanded to the least extent in close to two years.
"Reflecting the broader slowdown, India's composite PMI fell slightly to 57.1 in June from 59.3 in May, alongside softer sales volumes, slower job creation and more subdued pricing," Bhandari said.
The HSBC India Services PMI is compiled by S&P Global from responses to questionnaires sent to a panel of around 400 service sector companies.
