India's services sector demonstrated strong momentum in September, with the HSBC Services PMI rising to 55.2 from August's 54.1, according to the latest HSBC India PMI data. This represents the fastest expansion pace in three months, with the seasonally adjusted HSBC India Services PMI Business Activity Index signaling the strongest expansion since June. The PMI reading above 50.0 indicates growth in the services sector, which remains India's dominant economic segment. The September reading was revised lower from the preliminary reading of 55.8, indicating that the final data showed some moderation from initial expectations. As per HSBC Chief India Economist Pranjul Bhandari, the services sector continued to improve as domestic demand strengthened, while export business also expanded, though at a slower pace.
New business growth accelerated to its quickest pace in three months, driven by stronger demand across multiple sectors including digital solutions, food, insurance, loans, software, transportation, tours and travel. Finance and insurance and consumer services recorded the strongest increases in activity and sales, as reported by HSBC India. The improvement in September was led by stronger demand across key areas of the services economy, including financial, consumer and digital services. New business also increased, supported by stronger client demand and business activity. However, the broader July-September quarter recorded the sector's weakest growth since 2022, contrasting with the monthly improvement. According to HSBC's analysis, input-cost pressures on service providers eased to a 10-month low, reducing the need to raise selling prices, while export business continued to expand, although the pace of growth slowed significantly.
Input cost inflation showed significant moderation, reaching its lowest level since November 2025, according to HSBC India data. Additionally, selling price inflation remained moderate and eased to its lowest level since June, indicating improved cost management across the services sector. Employment growth also showed some moderation compared to August levels, with improving order books and projects in the pipeline supporting further hiring by services companies in September. The rate of job creation eased from August, though employment rose at a moderate pace. However, September's services-sector hiring also lost momentum, contrasting with the improvement in business activity. As per HSBC's survey, services companies continue to hire, encouraged by improving order books and projects in the pipeline. Fees charged to customers rose at their slowest pace since June, reflecting the moderation in cost pressures.
International demand showed significant weakness, with export order growth slowing to its weakest in nearly three years, according to the latest PMI data. This suggests that domestic customers provided stronger support for September's growth, as international demand remained subdued. The July-September average for the services index fell to its lowest since the quarter ended March 2022, indicating a concerning trend in quarterly performance despite monthly improvements. This contrasts with the strongest domestic demand growth in three months, highlighting the sector's reliance on domestic markets for expansion. The quarterly growth was the weakest in more than four years, indicating a significant deterioration in export performance and overall sector momentum.
Business confidence strengthened to a three-month high with firms citing resilient demand and rising customer enquiries, as reported by HSBC India. This improvement in confidence was supported by the strengthening domestic demand environment. However, the outlook for future activity remains cautious, with only around 16% of firms expecting activity to increase over the next year. The remaining firms expect activity to remain broadly unchanged, as reported by HSBC. The outlook remained positive, with service providers reporting improved expectations for future activity for the second consecutive month, according to HSBC's analysis. The services sector's performance also contrasts with the moderation in export momentum, as earlier September survey data showed new export orders rising at their slowest pace in 33 months.
The services upturn, combined with manufacturing growth accelerating to its fastest pace since February, lifted the India Composite PMI to a three-month high of 55.9 in September from August's 54.3, according to HSBC India data. This represents the fastest expansion in private-sector output since June, suggesting broad-based improvement across both manufacturing and services sectors. However, services growth during the Q2FY27 remained weaker than in the previous quarter, with the average growth for the quarter being the weakest since the three months ended March 2022. Despite the monthly improvement, the quarterly average remained the weakest since January-March 2022, tempering signs of recovery across both sectors. The services PMI remains firmly above the 50-point threshold, signalling continued expansion even as businesses navigate softer quarterly growth and changing demand conditions.
