India's services sector growth slowed to its weakest pace in 17 months in June as softer domestic demand, weaker new business inflows and subdued hiring weighed on activity. According to the latest HSBC India Services PMI survey, the Business Activity Index declined to 57.4 in June from 59.8 in May. While the reading remained well above the 50-point threshold that separates expansion from contraction, it marked the slowest pace of services sector growth since early 2025.
Key Highlights
- India’s services PMI slipped to 57.4 in June as domestic demand weakened.
- Export orders grew at a three-month high despite slowing business activity.
Domestic Demand Slows
The moderation came as a result of the smallest gain in new orders in over 2 years. Some companies enjoyed competitive prices, increased demand for e-commerce, increased bookings from customers and better domestic tourism, while others had faced a lack of demand among their customers and increasingly complex market conditions.
According to Pranjul Bhandari, Chief India Economist at HSBC, the latest reading reflects slowing domestic demand despite continued expansion. "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," she said.
Export Demand Remains a Bright Spot
International demand, however, was strong despite the lessening domestic demand. New export orders grew the quickest in three months, driven by more orders from Australia, Belgium, Canada, Germany, Malaysia, Nepal, Oman, Qatar, Singapore, UAE and the USA.
Hiring Stalls as Businesses Remain Cautious
Job expansion slowed in June, as service companies stopped hiring significantly after a strong service PMI in April and May. Business volumes were well described as being 'good', with companies reporting that current employment levels were adequate to cover current demand.
Inflation Pressures Ease
Prices remained moderate in the month. Input cost inflation slowed to a five-month low, but businesses continued to have increased costs for electricity, fuel, food and transportation. The output cost inflation also eased to the lowest level since November of 2025, enabling companies to put in place more competitive pricing policies.
Also Read: India's Manufacturing PMI Slows to 54.2 in June as Demand Moderates
Composite PMI Softens
The economy's overall private sector growth was also lackluster. HSBC India Composite PMI Output Index fell to 57.1 in June from 59.3 in May, and was the lowest in six months, as both manufacturing and services showed deceleration in output, jobs and intake of new orders. The business confidence was also at low, with companies citing competition, challenging economic conditions and rupee depreciation as key risks, which is also the lowest in five months.
