India's Services Sector Records Strong Start to 2025 with Two-Month High Activity
India's services sector has kicked off 2025 on a robust note, with business activity climbing to a two-month high in January. This positive momentum comes on the back of improving demand conditions and firms expanding their operational capacity to meet growing requirements.
PMI Data Shows Sustained Expansion Momentum
The seasonally adjusted HSBC India Services PMI Business Activity Index rose to 58.5 in January, up from 58.0 in December. This increase reflects faster growth in both output and new business orders. In PMI terminology, readings above the 50 mark indicate expansion, while those below signal contraction, making January's figure particularly encouraging for economic observers.
Pranjul Bhandari, chief India economist at HSBC, noted: "India's services PMI rose to 58.5 in January, up from 58.0 in December, signalling sustained momentum in the sector. Robust output growth was driven by a steady influx of new orders, including increased international demand from South and Southeast Asia."
Domestic and International Demand Fuel Growth
The survey revealed that new orders increased at the fastest pace in two months, with domestic demand remaining the primary contributor to growth. However, international business also expanded at a solid rate, indicating broadening market opportunities for Indian service providers.
Service companies reported fresh work from clients based in multiple countries including:
- Indonesia
- Kenya
- Malaysia
- Oman
- Qatar
- Sri Lanka
- Thailand
- Vietnam
This geographical diversification of demand sources provides additional stability to the sector's growth trajectory.
Improved Business Confidence and Employment Trends
Service providers responded to increased business volumes by adding staff, contributing to positive employment trends. Business confidence climbed to a three-month high, supported by several factors including efficiency gains, effective marketing strategies, and the acquisition of new clients.
Bhandari added: "Business confidence climbed to a three-month high, supported by efficiency gains, effective marketing, and the acquisition of new clients. While input and output prices are rising, they remain fairly mild by historical standards."
Moderate Price Pressures Across Sectors
While price pressures edged up during January, they remained moderate overall. The survey identified that the sharpest cost increases were reported in the Consumer Services segment, while the strongest rise in selling prices was observed in the Finance & Insurance sector.
Broader Private Sector Activity Strengthens
The positive momentum extended beyond services to the broader private sector. The HSBC India Composite PMI Output Index rose to 58.4 from December's 11-month low of 57.8. Composite PMI indices are calculated as weighted averages of manufacturing and services indicators, with weights based on each sector's relative contribution to GDP.
"The composite PMI also strengthened in January, reflecting solid demand growth across both manufacturing and services," Bhandari explained.
Employment Gains Across Sectors
On the employment front, the survey noted that private sector jobs increased at the start of 2025 after remaining flat in December. Both manufacturing firms and service providers recorded slight gains in staffing levels, indicating a broad-based improvement in employment conditions.
This comprehensive improvement across multiple indicators suggests that India's services sector is positioned for continued growth, supported by technological investments, expanding capacity, and both domestic and international demand drivers.
