India's Services Sector Growth Moderates In September Amid Slower Export Demand

India's services sector experienced a slight slowdown in September 2025, with the HSBC India Services Purchasing Managers' Index (PMI) falling to 60.9 from a 15 year high of 62.9 in August.

Despite this dip, the index remained well above the neutral 50.0 mark, indicating continued robust expansion in the sector.

The moderation was primarily attributed to a deceleration in export orders, which increased at the slowest pace since March.

Companies cited intensified price competition from international providers as a key factor restraining growth in foreign sales.

However, domestic demand remained resilient, bolstered by ongoing investments in technology and supportive public policies.

The new business sub-index, though lower than in August, still marked the second-fastest expansion since August 2024.

Business optimism for the year ahead improved to a six-month high, driven by expectations of enhanced efficiency, planned advertising campaigns, competitive pricing strategies, and anticipated tax cuts.

Employment growth in the services sector maintained a modest pace, with fewer than 5 per cent of surveyed companies reporting new hiring.

Both input cost pressures and price increases charged by service providers eased from August, with firms passing on extra costs to consumers at the shallowest rate since March.

Inflation in India rose to 2.07 per cent in August from 1.61 per cent in July, ending a nine-month streak of decline.

Despite this uptick, the rate remained within the Reserve Bank of India's target range of 2-6 per cent. The RBI held its key repo rate at 5.50 per cent during its 1 October meeting.

The HSBC India Composite PMI Output Index, which includes both manufacturing and services, fell to 61.0 in September from 63.2, indicating a general cooling in activity across both sectors, though overall expansion persists.

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