India’s Services Activity Steady at 58.8 in May; Export Demand Strongest in Nearly Two Decades

India's services sector growth steadied in May, with the HSBC India Services PMI, compiled by S&P Global, marginally rose at 58.8 from April’s 58.7—signalling sustained expansion in business activity. Healthy demand conditions, new client wins and a record staffing capacity supported the survey period growth.

The latest data, released on Wednesday, suggests that demand conditions remain healthy, with service providers noting steady inflows of new business, helped by advertising, repeat clients and a growing international appetite for Indian services.

The report highlighted that a key area of strength was exports, with survey participants reporting one of the strongest improvements in international demand in 19-and-a-half years of data collection. Markets in Asia, Europe and North America were cited as key contributors to this surge in overseas demand.

The employment growth stood out as nearly 16% of survey respondents reported higher payroll numbers, while just 1% reduced staff. This translated into the strongest job creation ever captured indicating that firms are scaling up aggressively to meet the rising workload.

"Strong international demand continued to fuel services activity, as evidenced by the new export business index’s uptick from April. To keep up with swelling demand, India’s service providers heavily increased staff recruitment. Indeed, the employment index rose to the highest reading ever recorded by this survey," says Pranjul Bhandari, HSBC’s chief India economist.

However, she flagged rising cost pressures as a growing concern, with input and output prices accelerating beyond their historical averages. Indeed, inflationary trends were visible in May, with companies reporting higher expenses on items like meat, oil and materials. This, along with increased spending on labour, nudged cost inflation to its highest point in 2025 so far. Selling prices also rose sharply—particularly in manufacturing—highlighting broader price pressures in the economy.

There was a recovery in business sentiment during May, with the overall level of confidence rising from April's 23-month low. Upgraded forecasts stemmed from expectations that greater staffing capacity, expanded clientele and marketing initiatives will support activity growth in the year ahead.

Meanwhile, India Composite PMI Output Index came at 59.3 in May, down only marginally from 59.7 in April and therefore signalling a further sharp upturn in aggregate activity. The downward movement in the headline index reflected softer growth of factory production, as services activity rose at a quicker pace. Regarding new business, there were slightly weaker increases at manufacturing companies and their services counterparts. At the composite level, the pace of growth remained sharp despite easing to a three-month low.