India’s dominant services sector continued to expand in February 2026 but at a slightly softer pace, with firms reporting moderate growth, rising cost pressures and the slowest increase in new business in over a year, according to the latest HSBC India Services Purchasing Managers’ Index (PMI) compiled by S&P Global.
The HSBC India Services PMI fell marginally to 58.1 in February from January’s 58.4, remaining well above the 50 threshold that separates expansion from contraction. That signals continued robust growth, although some underlying indicators point to cooling momentum.
Key Highlights
- India’s services PMI eases to 58.1 in February amid softer new order growth.
- Operating costs surge sharply, hitting near-multi-year highs for service firms.
- International demand and hiring improve, supporting overall business confidence.
Demand, Costs and Business Activity
A key highlight from the survey was a slowdown in new business growth, which expanded at its weakest pace since January 2025 — a trend analysts say reflects more intense competition among service providers and cautious domestic demand.
At the same time, operating costs surged sharply, registering the steepest increase in roughly two-and-a-half years. Firms attributed higher expenses to increases in food prices, energy costs and labour charges, and many companies passed a portion of these costs on to customers. Consequently, output prices charged by service providers rose at the fastest pace in six months.
HSBC India economist Pranjul Bhandari noted that while the headline PMI remained strong, “slower new order growth suggests demand headwinds for firms, even as international sales offer some relief.”
International Demand and Hiring Trends
One of the brighter aspects of the February report was a notable uptick in international sales, which expanded at the fastest pace since August last year. Firms reported stronger overseas demand from key markets including Canada, Germany, China, Singapore, the UAE, the United Kingdom and the United States, providing a supportive backdrop for service exports.
Businesses also expanded their workforce for the second consecutive month as firms sought to bolster capacity amid growth expectations. Employment growth accelerated, reversing some earlier caution and reflecting efforts to meet both current and anticipated demand.
Also Read: India's Service Sector Growth Hits Two-Month High in January PMI
Business Confidence and Composite Growth
Despite moderating growth in some areas, business sentiment strengthened. Business confidence climbed to its highest level in a year, with many firms expecting demand to improve over the coming months and optimistic about their strategic initiatives.
The overall composite PMI — which combines services and manufacturing activity — edged up to 58.9 in February from 58.4, marking the fastest pace of private sector growth in three months. This composite expansion underlines resilience in India’s broad economic momentum even as specific sectors face cost-related constraints.
Data from the updated inflation series showed headline inflation accelerating to 2.75% in January, bringing it comfortably within the Reserve Bank of India’s (RBI) 2–6% target band for the first time in five months. Analysts believe stabilisation of inflation alongside solid PMI readings could provide policymakers with flexibility on monetary conditions ahead.
Among services subsectors, finance and insurance reported the strongest growth in both output and new orders, while real estate and business services expanded more modestly. The mixed performance reflects divergent demand patterns across segments of the services economy.
