India's Services Sector Expansion Cools In January, But Hiring Remains Strong—All About It

India’s dominant services sector witnessed its slowest growth in over two years in January, as demand cooled, though hiring remained robust, according to a business survey released on Wednesday (5 February).

The HSBC final India Services Purchasing Managers’ Index (PMI), compiled by S&P Global, dropped to 56.5 in January from 59.3 in December, slightly below the preliminary estimate of 56.8.

Despite the decline, the index remained well above the 50-mark, indicating continued expansion, reported Economic Times.

"The business activity and new business PMI indices eased to their lowest levels since November 2022 and November 2023 respectively," said Pranjul Bhandari, chief India economist at HSBC.

"That said, new export business partly countered the downtrend and continued to rebound from a dip in late-2024, in line with official data."

The Indian economy—Asia’s third-largest—has been grappling with weakening consumption, prompting the government to introduce tax relief for the middle class in its annual budget on 1 February.

However, the budget lacked major reforms, which economists argue are crucial for sustaining long-term growth.

While demand for services rose at its slowest pace in 14 months, it remained strong, supported by international orders, which were at a five-month high.

The future activity sub-index fell to a three-month low, but the decline was marginal.

In contrast, businesses continued to hire at one of the fastest rates since the survey began in December 2005. Inflationary pressures intensified, with higher input costs and rising prices for consumers.

Despite these challenges, India’s retail inflation eased to a four-month low in December, increasing the likelihood of monetary policy easing. The Reserve Bank of India (RBI) is widely expected to cut its key repo rate on 7 February, according to a recent poll.

The services sector slowdown also overshadowed a six-month high expansion in manufacturing, pulling the overall Composite PMI down to 57.7 in January, from 59.2 in December.

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