India’s services sector continued to expand in June, but growth lost momentum as weaker domestic demand and tougher market conditions weighed on activity. The HSBC India Services PMI Business Activity Index fell to 57.4 in June from 59.8 in May, marking its lowest level in 17 months. While the reading remained well above the 50 mark, it signalled the slowest rise in business activity since November 2023.
New business growth also slowed sharply, recording its weakest increase in more than 2½ years. Companies said softer client interest and challenging market conditions hurt demand, although some firms benefited from competitive pricing, stronger e-commerce demand, higher customer bookings and improved domestic tourism.
A positive highlight was overseas demand. New export orders grew at the fastest pace in three months, with businesses reporting stronger demand from countries including Australia, Belgium, Canada, Germany, Malaysia, Nepal, Oman, Qatar, Singapore, the UAE and the US.
Hiring activity was broadly unchanged in June after strong recruitment in April and May, as companies said existing staff levels were sufficient. Business confidence also eased to a five-month low, with firms citing competition, economic uncertainty and rupee depreciation as potential challenges, even as many remained optimistic about growth supported by new clients, marketing efforts and equipment investments.
Inflationary pressures continued to cool. Input costs increased at the slowest pace in five months, while prices charged by service providers rose at the weakest rate since November 2025. Higher electricity, food, fuel and transport costs continued to push up expenses, but overall price pressures eased compared with previous months.
Across the broader economy, the HSBC India Composite PMI Output Index declined to 57.1 in June from 59.3 in May, indicating slower growth in both manufacturing and services. Sales growth, hiring and export demand all moderated, while business optimism across the private sector fell to a five-month low, reflecting softer demand and easing pricing power.
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