India Services PMI Rises to 55.2 in September as Domestic Demand Drives Three-Month High

Activity across India's dominant services sector gathered momentum in September, expanding at its quickest pace in three months driven by robust domestic consumption, according to survey data released by HSBC and S&P Global.

The seasonally adjusted HSBC India Services Purchasing Managers' Index (PMI) Business Activity Index rose to 55.2 in September from 54.1 in August. While the print comfortably remained above the 50-mark threshold that separates expansion from contraction, it came in below the preliminary flash estimate of 55.8.

Key Survey Highlights

• New Orders Accelerate: New business intakes advanced at the quickest rate since June, buoyed primarily by domestic demand for digital solutions, software, financial services, insurance, consumer services, and travel.
• Export Momentum Slows: International demand softened, with growth in new export orders decelerating to its weakest rate in nearly three years, highlighting that domestic consumption served as the primary growth engine.
• Cooling Price Pressures: Input cost inflation softened to its lowest level in 10 months, while selling price inflation moderated to its slowest pace since June as companies experienced reduced pressure to pass on operating costs.
• Subdued Hiring: Although employment expanded to accommodate existing project pipelines, the overall rate of job creation eased compared to August.
• Business Sentiment: Year-ahead business confidence touched a three-month high, yet remained tempered by historical standards, with only about 16% of respondents anticipating higher activity over the next 12 months.

"The PMI survey suggested that India's services sector continued to improve, supported by strengthening domestic demand," said Pranjul Bhandari, Chief India Economist at HSBC. "At the same time, export business continued to expand, although the pace of growth slowed," she added, noting that easing input-cost pressures had lessened the need for service providers to raise output prices.

Composite PMI Rebounds Despite Weaker Quarter

The improvement in the services sector, coupled with manufacturing output accelerating at its fastest pace since February, pushed the HSBC India Composite PMI Output Index to a three-month high of 55.9 in September, up from 54.3 in August.

Despite the monthly rebound, the broader July–September period painted a more cautious picture. The quarterly average for services business activity fell to its lowest level since the quarter ended March 2022, underscoring a broader moderation in overall economic growth compared to the start of the fiscal year.

For Indian market participants, the cooling of input costs represents a positive development for service-oriented firms' operating margins, but the slowdown in global order flows and cautious quarterly trends may prompt market focus toward incoming corporate earnings and central bank commentary.

Tags: HSBC India S&P Global Services Sector Composite PMI Indian Economy