India’s services sector continued to expand in June, but the pace of growth eased as weaker domestic demand and slower client acquisition weighed on business activity. The latest HSBC India Services PMI showed that the sector remained in expansion territory, although momentum weakened to its slowest level in nearly one-and-a-half years. The seasonally adjusted HSBC India Services PMI Business Activity Index declined to 57.4 in June, down from 59.8 in May. Since any reading above 50 signals expansion, the latest figure indicates that services activity is still growing. However, it marks the weakest rate of expansion in the past 17 months, reflecting a more cautious business environment.
The moderation was largely linked to slower growth in fresh business. New order inflows increased at the weakest pace in more than two-and-a-half years as several companies reported softer domestic demand and reduced customer interest.
Businesses cited mixed trends during the month. Some service providers benefited from competitive pricing strategies, stronger e-commerce demand, higher customer bookings and improved domestic tourism activity. At the same time, many companies pointed to difficult market conditions and subdued client demand as key reasons behind slower sales growth.
“India’s services PMI remained in expansionary territory but eased to 57.4 in June, the lowest reading in 17 months,” said Pranjul Bhandari, chief India economist at . She said the loss of momentum pointed to more challenging market conditions and weaker demand, particularly at home. “Even so, external demand held up well as overseas sales stayed robust and growth reached a three-month high,” she said, according to a Reuters report.
Exports continued to provide support for the sector. New export orders expanded at their fastest pace in three months, driven by healthy demand from customers in countries including Australia, Belgium, Canada, Germany, Malaysia, Nepal, Oman, Qatar, Singapore, the UAE and the United States.
Hiring Pauses As Firms Reassess Workforce Needs
Employment growth in the services sector lost momentum during June, with businesses largely keeping workforce numbers unchanged. Following solid recruitment in April and May, many firms indicated that existing staff levels were sufficient to meet current workloads.
Outstanding business volumes also remained broadly stable, suggesting companies were able to manage incoming work without significantly increasing headcount. The survey showed that the relevant index stayed only slightly above the neutral 50 mark.
Inflationary pressures eased further during the month. Input cost inflation slowed to its lowest level in five months, although firms continued to face higher expenses related to electricity, food, fuel and transportation. Meanwhile, the pace at which companies increased prices charged to customers weakened to its slowest since November 2025 and stayed below the long-term average.
Among the different service categories, consumer services continued to record the highest inflation in both input costs and selling prices, despite softer increases compared with the previous month.
Private Sector Momentum Also Eases
The slowdown extended beyond services into the broader economy. The HSBC India Composite PMI Output Index, which combines manufacturing and services, fell to 57.1 in June from 59.3 in May, marking the weakest expansion since March.
Growth in output, fresh orders and employment moderated across both sectors. Hiring across the private sector expanded at its slowest pace so far in 2026, while both input cost inflation and output price inflation eased to five- and seven-month lows, respectively.