India's Services PMI Hits 59.8 in May, Fastest Growth Since November

Indian Services PMI accelerates to 59.8 in May as cost pressures moderate

New Delhi, June 3

The Services PMI highlighted a broader recovery in the private sector economy, with the composite output index rising from 58.2 in April to 59.3 in May.

New orders placed with service providers climbed at the quickest pace in six months, outpacing manufacturing growth even as both sub-sectors recorded faster rates of expansion. This acceleration in demand occurred alongside a notable slowdown in charge inflation, as firms limited price hikes to pass through expenses.

According to the report, input prices across the service economy continued to increase at an above-trend pace, with "participants reporting higher costs for food, fuel, gas, labor, and materials." Despite these lingering cost pressures, the rate of overall input cost inflation eased to a four-month low, which supported a more moderate increase in selling prices. Aggregate selling charges rose at the weakest pace since January, aligning closely with the long-run historical trend.

Commenting on the economic performance, Pranjul Bhandari, Chief India Economist at HSBC, said, "India's services PMI signalled an expansion in business activity in May, supported by a continued rise in new business. External demand for India-provided services also grew at a faster pace, rebounding after a sharp decline in April."

"Input cost inflation eased, which in turn reduced pressure on selling prices," Bhandari noted regarding the price dynamics.

The expansion extended to international markets, where new export business rose solidly, supported by client gains across several regions including Australia, Canada, France, Germany, Hong Kong, Malaysia, the UAE, and the UK. However, the growth rate for external demand remained below the average registered during the 2025 calendar year, trailing total domestic sales gains.

In response to elevated business volumes, services companies signaled a further increase in payroll numbers. "The overall rate of job creation was solid and the second-fastest in just under a year (behind April), but fewer than 7% of panellists signalled greater hiring and the vast majority indicated no change in headcounts," the report said.

Outstanding business volumes registered a negligible uptick, remaining only fractionally above the neutral 50.0 threshold.

The report revealed that consumer services remained the strongest performer among the monitored sub-sectors, leading the growth in both output and new business intakes. Concurrently, consumer services also topped the inflation rankings, posting the sharpest increases in both input costs and output charges.

Looking ahead to the next 12 months, services firms collectively expressed optimism regarding favorable demand conditions, though the overall level of business confidence slipped to a three-month low and remained below the historical trend.

— ANI