India Services PMI Eases to 58.1 in February; Order Growth Hits 13-Month Low

India’s services sector continued to expand in February, although growth in new orders slowed amid rising competition, according to the latest HSBC India Services Purchasing Managers’ Index (PMI) compiled by S&P Global.

The Services PMI Business Activity Index stood at 58.1 in February, marginally lower than 58.5 in January, indicating another month of strong expansion in service-sector output. A reading above 50 signals growth in activity.

Despite stable output growth, the pace of new order expansion slowed to a 13-month low, suggesting demand growth has moderated. Survey respondents cited stronger marketing efforts and client enquiries as factors supporting sales, while heightened competition weighed on order growth.

International demand remained a bright spot. Service providers reported the fastest rise in export orders since August, with businesses gaining clients in markets including Canada, Germany, mainland China, Singapore, the UAE, the UK and the US.

Companies also increased hiring during the month to meet operational requirements, while business confidence rose to its highest level in a year as firms anticipated higher activity in the coming months.

At the same time, cost pressures intensified, with input prices rising at the fastest pace in two-and-a-half years. Businesses pointed to higher spending on food items, labour, energy and commodities. Many firms passed these higher costs on to customers, resulting in service charges increasing at the fastest rate in six months.

"While new order growth slowed to a 13-month low amid rising competition, service providers saw a notable pick-up in international sales and responded with increased hiring to meet operational needs," said Pranjul Bhandari, chief India economist at HSBC, commenting on the data.

Input and output price inflation accelerated, with firms passing higher expenses — particularly for food and labour — on to customers, yet business confidence climbed to its highest level in a year as companies looked to broaden their market presence," she added.

At the broader level, the HSBC India Composite PMI Output Index rose to 58.9 in February from 58.4 in January, signalling the fastest expansion in private-sector activity in three months, supported by stronger momentum in manufacturing.