India's Services Sector Growth Sees Sharp Uptick in Feb on New Work Orders Amid Strong Demand: PMI

India's services sector activity witnessed a sharp uptick in February boosted by improving domestic and international demand, which resulted in a quicker expansion in output and a substantial increase in employment, a monthly survey said on Wednesday.

The seasonally adjusted HSBC India Services PMI Business Activity Index rose from January's 26-month low of 56.5 to 59.0 in February, indicating a sharp rate of expansion.

In the Purchasing Managers' Index (PMI) parlance, a print above 50 means expansion, while a score below 50 denotes contraction.

"India's services business activity index rose to 59.0 in February 2025, up considerably from January's 26-month low of 56.5. Global demand, which grew at its fastest pace in six months according to the new export business index, played a major role in driving output growth for India’s services sector," said Pranjul Bhandari, Chief India Economist at HSBC.

According to the survey, productivity gains, favourable underlying demand and greater intake of new business.

Moreover, gains in international orders supported this uptick in growth, with service providers reporting better demand from clients in Africa, Asia, Europe, the Americas and the Middle East, the survey said.

In order to accommodate for rising new business and alleviate capacity pressures, Indian services firms continued to pursue recruitment drives. Employment expanded sharply, and at one of the fastest rates seen since data collection began in December 2005.

"Job creation and charge inflation remained strong during February. Looking ahead, business sentiment remains broadly positive, but did slightly slip last month to its lowest level since August 2024," Bhandari said.

Advertising, better customer relations, efficiency gains and healthy demand conditions all underpinned upbeat projections for output in the year ahead. Around one-quarter of survey members forecast growth in the year ahead, while fewer than 2 per cent were pessimistic.

Meanwhile, the HSBC India Composite Output Index rose from 57.7 to 58.8, indicating a substantial rate of expansion.

Composite PMI indices are weighted averages of comparable manufacturing and services PMI indices. Weights reflect the relative size of the manufacturing and service sectors, according to official GDP data.

At the composite level, payroll numbers expanded at a marked pace that was little changed from January's survey record, while cost pressures across the private sector were at their least intense since last October, the survey said.

The HSBC India Services PMI is compiled by S&P Global from responses to questionnaires sent to a panel of around 400 service sector companies.

On the domestic macroeconomic front, the Indian economy grew by 6.2 per cent in the December quarter, recovering sequentially from seven-quarter lows, but the expansion came in lower than last year.

For the full 2024-25 fiscal (April 2024 to March 2025), the government now pegs GDP growth at 6.5 per cent, marginally higher than its initial estimate of 6.4 per cent but below the revised growth rate of 9.2 per cent for 2023-24.

The growth in the current fiscal and less than 7 per cent expected in the next will keep India as the fastest-expanding major economy.