India's crucial services sector witnessed a moderation in its pace of expansion during December 2025, hitting an eleven-month low, according to the latest private survey data released on Tuesday. The key business activity index fell, reflecting a slowdown in new order inflows and a pause in job creation, though the sector remained firmly in growth territory.
Key PMI Indicators Show Deceleration
The seasonally adjusted HSBC India Services Purchasing Managers' Index (PMI), compiled by S&P Global, declined to 58.0 in December from 59.8 in November. This marks the slowest rate of expansion recorded since January 2025. It is important to note that any reading above the neutral 50.0 mark signifies expansion, indicating the sector continued to grow, albeit at a more measured pace.
The survey highlighted that the rates of increase for both new business received and output eased to their weakest in nearly a year. Consequently, service providers held back on hiring additional staff, leading to a stalling of job creation in the sector during the month. Despite the slowdown, the current PMI level still points to a substantial rise in overall output.
Business Confidence and Economic Context
While firms expressed confidence regarding a rise in business activity over the coming year (2026), the survey noted that the overall level of positive sentiment dipped for the third consecutive month. Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence, commented on the trends, stating, "While India's service sector continued to perform well in December, the retreat in several survey indicators as 2025 ended may suggest a moderation in growth heading into the new year."
She added a note of optimism regarding inflation, saying, "The benign inflation environment bodes well for the outlook. If services firms continue to see only mild increases in their expenses, they should be better positioned to compete and limit price hikes, thereby boosting sales and creating more jobs." De Lima also pointed out that companies showed anxiety about market uncertainty and currency fluctuations, though a weaker rupee likely boosted the competitiveness of services exports, which saw a notable rise in December.
Broader Economic Impact and Expert Views
The performance of the services sector is critically important for the Indian economy as it constitutes over 50% of the country's Gross Domestic Product (GDP). This slowdown follows a period of robust economic expansion, where India's GDP grew by a striking 8.2% in the July-September quarter, its fastest pace in six quarters.
Economists view the December dip as part of a typical cyclical pattern. Madan Sabnavis, Chief Economist at Bank of Baroda, explained, "After the peak witnessed across sectors in the festival period in October, including the services sectors of travel and tourism, usually a month-on-month drop is witnessed in the following months which has been seen in December. It may even ease further in January as it is largely cyclical."
The survey, which gathers responses from approximately 400 companies across diverse segments like finance, insurance, transport, information & communication, and real estate, also showed a cooling in the composite PMI. India's Composite PMI Output Index, covering both services and manufacturing, eased to 57.8 in December from 59.7 in September. Job creation at this composite level also stalled. However, inflation pressures remained muted, with input costs and output prices rising only mildly and at rates below their long-term averages.
