India’s Services Activity Rises to Three-Month High in September as Domestic Demand Strengthens

India’s services sector expanded at its fastest pace in three months in September 2026, supported by stronger domestic demand, higher new orders and improved business confidence, according to the latest HSBC India Services PMI compiled by S&P Global.

The seasonally adjusted HSBC India Services Business Activity Index rose to 55.2 in September from 54.1 in August, remaining above the 50-point level that separates expansion from contraction. The reading shows that services activity continued to grow, even though the pace remained below the exceptionally strong levels seen a year earlier.

New Orders Strengthen as Domestic Demand Improves

The September survey showed that new business rose at the fastest pace in three months, reflecting improved sales across several parts of the services economy.

Finance and insurance, along with consumer services, recorded some of the strongest increases in activity and new business. Companies also reported better demand for digital services, transportation, travel, software, food-related services and financial products.

HSBC Chief India Economist Pranjul Bhandari said the services sector continued to improve as domestic demand strengthened. The data suggest that household spending, financial activity and technology-linked demand remain important supports for the wider services economy.

Export Demand Continues to Expand

International demand for Indian services also remained in expansion territory during September, with firms reporting new business from markets including Germany, the United Arab Emirates, the United Kingdom and the United States.

However, the pace of growth in new export business slowed and was the weakest in nearly three years. This indicates that domestic demand is currently providing a stronger source of momentum than overseas orders.

Even so, continued export growth underlines the importance of Indian services in global markets, particularly in technology, financial services and business support.

Business Confidence Improves for a Second Month

Sentiment among service providers strengthened during September as customer enquiries increased and order pipelines improved.

Just under 16% of surveyed firms expected business activity to rise over the next 12 months, while most anticipated broadly stable conditions. Confidence remained below its long-term average, but the improvement marked a second consecutive month of stronger expectations.

The rise in optimism is significant because business confidence often influences hiring, investment and capacity expansion decisions in the months ahead.

Employment Continues to Grow

Service-sector firms continued to add workers during September as new orders increased and companies expanded activity.

The pace of hiring moderated compared with August, but employment still rose overall. Slower job creation was reported in some areas, including real estate and business services, while other segments continued to recruit.

The continued increase in employment suggests that firms are still responding to demand growth by expanding operational capacity.

Cost Pressures Ease

Input-cost inflation also moderated during September, offering some relief to service providers.

Companies continued to report higher costs for food, fuel, insurance, maintenance, software and technology services, but the overall rate of cost inflation fell to its weakest level since November 2025.

Selling-price inflation also eased, reducing pressure on companies to pass higher costs on to customers. This combination of stronger demand and softer cost pressures provided a more favourable operating environment during the month.

Manufacturing Activity Also Accelerates

The improvement in services was accompanied by a stronger performance in manufacturing.

The HSBC India Manufacturing PMI rose to 55.1 in September from 52.8 in August, reaching a seven-month high. Manufacturers reported stronger demand, higher new orders and improved production.

The simultaneous expansion of services and manufacturing strengthened overall private-sector activity and points to a broader recovery in momentum.

Composite PMI Rises to 55.9

The HSBC India Composite PMI Output Index, which combines manufacturing output and services activity, increased to 55.9 in September from 54.3 in August.

The reading marked the strongest overall private-sector expansion since June. Aggregate sales also improved as new orders increased across both manufacturing and services.

This broader rise suggests that the September improvement was not limited to one part of the economy, but reflected stronger activity across multiple sectors.

Quarterly Momentum Remains More Moderate

Despite the stronger September reading, the average level of services activity during the July–September quarter remained relatively subdued.

The quarterly average was the lowest since the three months ended March 2022, indicating that the stronger September performance followed a softer period earlier in the quarter.

This distinction is important because the monthly data show improving momentum, while the quarterly picture still reflects slower average growth compared with previous periods.

Domestic Demand Remains the Main Driver

The latest PMI data reinforce the central role of domestic demand in supporting India’s economic expansion.

Services activity strengthened, manufacturing recovered, employment increased and cost pressures eased during the same month. Export business continued to expand, but at a more moderate pace than domestic demand.

The September numbers therefore point to a private-sector economy gaining momentum as India entered the second half of the financial year.

With both services and manufacturing expanding, new orders rising and business confidence improving, the economy has a stronger base for continued growth in the coming months.

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References

1. S&P Global — HSBC India Services PMI, September 2026.
2. S&P Global — HSBC India Composite PMI Output Index, September 2026.
3. S&P Global — HSBC India Manufacturing PMI, September 2026.
4. HSBC — Statement by Chief India Economist Pranjul Bhandari on September 2026 PMI performance.
5. DD India / Government of India public information on September 2026 services activity.

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