India's Services Sector Growth Slows: What Does This Mean for 2026?
Economic Activity in India's Services Sector
New Delhi: The growth of India's services sector experienced a slowdown in December, with the pace of new work and output expansion reaching its lowest point in 11 months, as reported by a recent monthly survey.
The seasonally adjusted HSBC India Services PMI Business Activity Index decreased from 59.8 in November to 58.0 in December, marking the slowest growth rate since January.
In the context of the Purchasing Managers' Index (PMI), a score above 50 indicates growth, while below 50 signifies contraction. Although firms maintained a positive outlook for growth, overall sentiment dipped to its lowest level in nearly three and a half years.
"Despite the service sector's solid performance in December, the decline in several survey indicators as 2025 concluded may indicate a slowdown in growth as we enter the new year," stated Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence.
Regarding external demand, companies reported improvements, particularly from regions such as Asia, North America, the Middle East, and the UK, with new export orders increasing significantly.
The survey also noted modest rises in input costs and output charges.
"The favorable inflation environment is promising for the outlook. If service firms continue to experience only slight increases in expenses, they will be better positioned to compete and minimize price hikes, which could enhance sales and create more jobs," Lima remarked.
Indian service companies expressed confidence in increased business activity for 2026, yet the overall positive sentiment fell for the third consecutive month, reaching its lowest point in almost three and a half years due to rising market uncertainty and concerns regarding exchange rate fluctuations.
"Companies voiced some concerns about market volatility and currency movements. While the recent depreciation of the rupee may have raised import costs, it has likely made exports more competitive. Notably, despite the general trend of slowing growth, service exports saw a significant rise in December," Lima added.
Additionally, private sector output growth fell to an 11-month low in December.
The HSBC India Composite PMI Output Index dropped from 59.7 in November to 57.8 in December, the weakest performance since January 2025, reflecting slowdowns in both manufacturing and service sectors.
Composite PMI indices are calculated as weighted averages of the manufacturing and services PMI indices, with weights based on the relative sizes of these sectors according to official GDP data.
India's private sector continued to see modest increases in both input costs and output charges. Job creation at the composite level stagnated in December, with a slowdown in growth among goods producers and slight job losses in service providers.
Looking forward, private sector companies remain optimistic about growth prospects, although sentiment has decreased to a 41-month low, according to the survey.