India’s services sector witnessed a sharp acceleration in growth during June, with the Purchasing Managers’ Index (PMI) climbing to its highest level since August 2024, driven by strong domestic orders and sustained export demand, reinforcing optimism about the country’s economic resilience amid global headwinds.
Services PMI Overview
The HSBC India Services PMI, compiled by S&P Global, rose to 61.8 in June from 60.4 in May, marking the fastest expansion in nearly ten months. This reading remains well above the 50-mark threshold separating growth from contraction.
| Month | Services PMI | Key Driver |
|---|---|---|
| June 2025 | 61.8 | Sharp rise in new orders and business activity |
| May 2025 | 60.4 | Strong domestic demand |
| April 2025 | 60.1 | Broad-based recovery in services |
| August 2024 | 62.3 | Festive season and tourism boost |
Key Highlights Of The June Services PMI
- New business inflow surged, attributed to higher domestic consumption and steady export orders from Asia, Europe, and the Middle East.
- Employment rose marginally, as companies expanded capacity to meet rising workloads.
- Input cost inflation remained moderate, enabling firms to maintain competitive pricing strategies.
- Business confidence improved, with firms upbeat about prospects for the coming year, despite geopolitical and inflationary uncertainties.
Sector-Wise Performance Snapshot
| Services Segment | June Performance | Growth Driver |
|---|---|---|
| Finance & Insurance | Strong growth | Retail credit and investment products demand |
| IT & Business Services | Robust expansion | Outsourcing and digital transformation deals |
| Transport & Logistics | High growth | Increased freight and travel demand |
| Hospitality & Tourism | Continued recovery | Domestic tourism and corporate events |
| Real Estate & Leasing | Modest growth | Improved leasing activity in commercial hubs |
Export Demand Strengthens
The sub-index for export business rose to its highest level in nearly a year, indicating resilient global demand for Indian IT, consultancy, financial services, and logistics despite lingering global economic slowdown fears.
Analysts’ Views On PMI Data
- Pranjul Bhandari, HSBC Chief India Economist:
“India’s services sector continues to show remarkable resilience with broad-based expansion. Export orders remain strong, reflecting India’s competitive edge in digital, knowledge, and professional services globally.” - S&P Global Economics Team:
“The latest PMI data indicates a positive start to Q2FY26 for India’s services economy, which along with solid manufacturing growth, will support overall GDP momentum despite external challenges.”
Services PMI Compared To Manufacturing PMI
India’s manufacturing PMI in June stood at 58.7, reflecting solid factory output growth. The services PMI outpaced manufacturing for the fourth consecutive month, highlighting the services sector’s rising contribution to overall economic growth.
| Indicator | June 2025 | May 2025 | Trend |
|---|---|---|---|
| Manufacturing PMI | 58.7 | 58.4 | Steady expansion |
| Services PMI | 61.8 | 60.4 | Faster acceleration |
| Composite PMI | 60.4 | 59.5 | Strong overall economic activity |
Implications For GDP Growth
The robust PMI readings strengthen expectations that India’s GDP growth in FY26 could comfortably exceed the Reserve Bank of India’s (RBI) estimate of 7%, provided monsoon patterns remain normal and rural demand recovery sustains.
Employment And Wage Trends
While job creation in services remained positive, firms indicated moderate wage pressures, as skilled workforce demand rose in IT, banking, and professional services. However, companies remain cautious about significant headcount expansions amid global economic uncertainties.
Inflationary Pressure Remains Controlled
Input price inflation eased slightly compared to May, providing relief to service providers grappling with elevated wage and fuel costs. Most firms, however, passed only part of these costs to customers, supporting competitive pricing.
Global Context: India Outpaces Regional Peers
| Country | Services PMI (June 2025) | Trend |
|---|---|---|
| India | 61.8 | Accelerating |
| China | 52.4 | Moderate recovery |
| Japan | 54.2 | Steady growth |
| South Korea | 51.6 | Marginal expansion |
| Singapore | 53.5 | Improving business sentiment |
India’s services PMI remains the highest among major Asian economies, reflecting strong domestic fundamentals and robust export competitiveness.
Outlook For Key Services Segments
- IT & Business Process Outsourcing (BPO):
High global demand for digital transformation, cloud, AI, and cybersecurity services will sustain double-digit revenue growth for Indian IT majors in FY26. - Financial Services:
Credit offtake remains strong across retail, SME, and housing segments, supported by stable interest rates and buoyant stock markets driving wealth management and brokerage activities. - Travel & Tourism:
Domestic travel has crossed pre-pandemic levels, while inbound tourism continues gradual recovery. The upcoming festive season and international events will further boost growth. - Hospitality:
Occupancy and room rates are nearing all-time highs in metros, aided by corporate conferences and leisure tourism. - Transportation & Logistics:
Expansion in e-commerce, manufacturing, and agri-exports is supporting sustained logistics demand.
Government Reforms Supporting Services Growth
- PLI Scheme Extensions: For IT hardware, telecom equipment, and drones, boosting ancillary service demand.
- Startup Policy Enhancements: Tax relaxations and fund-of-funds support for fintech, healthtech, edtech, and agri-tech startups.
- Ease Of Doing Business Measures: Faster approvals and digitisation of compliance, encouraging foreign investment in professional services.
- Skilling Initiatives: Programmes to bridge talent gaps in AI, data science, cloud, and EV maintenance services.
Investor Perspective
The services sector’s strong PMI performance augurs well for:
- Banks and NBFCs with rising credit demand and digital payments usage.
- IT firms with robust deal pipelines despite global macro volatility.
- Hospitality and travel companies as tourism rebounds.
- Logistics providers with consistent freight demand.
Risks To Watch
- Volatility in global demand due to recession risks in US and Europe.
- Rising geopolitical tensions affecting IT and shipping sectors.
- Supply-side inflationary pressures if fuel prices rise sharply.
- Labour market tightness in select high-skill segments.
Conclusion
India’s services sector has once again emerged as a pillar of economic resilience, with June PMI data highlighting accelerating growth driven by domestic consumption and strong export orders. Sustaining this momentum will require supportive policies, global economic stability, and continued digital and infrastructural transformation to maintain competitiveness in the coming quarters.
Disclaimer: This news content is for informational purposes only. Readers are advised to evaluate macroeconomic data with professional financial advisors before making any investment or strategic decisions.
