India's services sector demonstrated strong momentum in January 2026, with the HSBC India Services PMI Business Activity Index rising to 58.5, marking a two-month high from December's 58.0. According to the latest HSBC India Manufacturing Purchasing Managers' Index, this recovery was driven by faster expansion in new business intake and output, prompting service providers to resume hiring activities after a period of contraction. The PMI is derived on the basis of responses from 400 purchasing executives of services companies in the private sector, with an index above 50 signalling expansion and below 50 indicating contraction. As per HSBC, the latest reading was consistent with a historically sharp rate of expansion, with service providers across the country reporting a recovery in growth during January. "India's services PMI rose to 58.5 in January, up from 58.0 in December, signalling sustained momentum in the sector," said Pranjul Bhandari, Chief India Economist at HSBC. The reading signals "sustained momentum in the sector" and was supported by demand buoyancy, new business gains and technology investments. The pickup in activity was driven by an acceleration in new business, a key gauge of demand, which expanded at its fastest pace since November. Firms attributed the rise to a stronger online presence and aggressive marketing efforts that helped boost sales.
The services sector's improvement was supported by stronger demand and a rebound in hiring, as reported by HSBC. New orders rose at the quickest pace in two months after slipping to an 11-month low at the end of 2025. The domestic market remained the main source of new business gains, although international orders also rose at a solid pace, marking the fastest expansion in three months. Companies cited stronger client interest and an improved online presence as key factors driving higher sales. Survey participants remarked on new business gains from clients in Indonesia, Kenya, Malaysia, Oman, Qatar, Sri Lanka, Thailand and Vietnam. As per HSBC's Chief India Economist Pranjul Bhandari, "Robust output growth was driven by a steady influx of new orders, including increased international demand from South and Southeast Asia." The increase in orders led service providers to resume hiring in January, though the pace of job creation was only marginal as the vast majority of firms opted to leave workforce numbers unchanged. Demand was also supported by an improvement in overseas orders, with new export business growing at its fastest pace in three months. Survey respondents cited increased demand from Indonesia, Qatar, Sri Lanka and Vietnam.
Service providers showed increased optimism towards the business outlook, with business confidence climbing to a three-month high. According to HSBC, this improvement was supported by efficiency gains, effective marketing, and the acquisition of new clients. Rising workloads prompted service providers to resume hiring in January, with private sector employment increasing at the start of 2026 after stagnating in December. The latest results showed slight rates of job creation at manufacturing firms and their services counterparts, with the vast majority of firms opting to leave workforce numbers unchanged amid sufficient resources for current requirements. Despite demand picking up slightly, hiring remained subdued with employment returning to growth after contracting in December, but the pace of job creation hovered just above the 50 mark, signalling near-stagnation in labour market conditions. The latest data showed a broadly stable volume of pending workloads across the service economy, with the respective seasonally adjusted index registering only fractionally above the neutral mark of 50 in January. Looking ahead, service providers remain optimistic, with firms citing efficiency gains, marketing initiatives and new client acquisitions as key drivers of improved sentiment.
Companies reported higher costs for items such as eggs, electronic goods, meat, paper, parts and vegetables, with input costs rising at their fastest pace since September. According to HSBC, output charges increased at a three-month high, though both input and output price increases remained mild by historical standards. The HSBC India Composite PMI Output Index rose from last December's 11-month low of 57.8 to 58.4 in January, signalling a sharp rate of expansion. Cost pressures were by far most intense in the Consumer Services category, while the strongest increase in output charges was noted in the Finance & Insurance sector. Service providers reportedly sought to better balance cost rises and profitability, with the overall increase being mild in the context of historical data. As per HSBC, "While input and output prices are rising, they remain fairly mild by historical standards." The survey mentioned that service providers continued efforts to balance higher cost with profitability. At the same time, inflationary pressures edged higher with input costs rising at their fastest pace since September, driven by higher prices for food, electronics and paper, prompting service providers to pass on part of the increase to customers.
The HSBC India Composite PMI, which combines manufacturing and services data, increased to 58.4 in January from December's 11-month low of 57.8. This composite reading signalled a sharp rate of expansion, supported by stronger growth in both manufacturing and services sectors. Improved demand conditions across the two sectors also lifted overall sales, taking the pace of expansion to a two-month high. The composite PMI indices are weighted averages of comparable manufacturing and services PMI indices, with weights reflecting the relative size of the manufacturing and service sectors according to official GDP data. "The composite PMI strengthened in January, reflecting solid demand growth across both manufacturing and services," said Pranjul Bhandari. The latest data indicated broadly stable levels of outstanding business across the services sector, with the seasonally adjusted index for pending workloads standing only marginally above the neutral 50.0 mark in January. "The composite rating is the result of an average of the rankings based on the following ratings: Fundamentals (Composite), Valuation (Composite), Financial Estimates Revisions (Composite), Consensus (Composite), and Visibility (Composite)." Manufacturing activity also edged higher, with the PMI rising to 55.4 in January from 55 in December, supported by growth in output and new orders.