India’s Services PMI Climbs to Four-Month High of 55.8 in October as Inflationary Pressures Ease

India’s services sector recorded its strongest expansion in four months during October 2026, supported by improving domestic demand, increased business orders and easing inflationary pressures. The HSBC India Services Purchasing Managers’ Index (PMI), compiled by S&P Global, rose to 55.8 in October from 55.2 in September, reflecting sustained growth across major segments of the services economy.

The latest survey, released on November 4, showed that business activity remained comfortably above the 50-point threshold separating expansion from contraction. The improvement was accompanied by a significant moderation in operating expenses, with input cost inflation declining to its lowest level in more than six years. The combination of stronger business activity and easing cost pressures provided encouraging indications of continued resilience in India’s services sector.

Domestic Demand Drives Stronger Business Activity

Domestic demand emerged as the principal driver of services sector growth during October, with companies reporting increased customer enquiries, new client acquisitions and stronger business orders. Survey participants attributed the improvement to favourable market conditions, successful advertising campaigns and increased demand for services across several industries.

New business volumes expanded at their fastest pace since June 2026, indicating renewed momentum in domestic commercial activity. The acceleration in sales supported higher output across all four broad service categories covered by the survey, demonstrating that the improvement extended beyond individual industries.

Finance and insurance businesses recorded the strongest expansion in both output and new orders, emerging as the leading contributors to services sector growth. Real estate and business services experienced comparatively slower expansion, although both continued to register positive growth in business activity.

The widespread improvement highlighted the strength of domestic demand in sustaining India’s services economy, particularly as international market conditions continued to influence export-oriented businesses.

Input Cost Inflation Falls to Lowest Level Since August 2020

One of the most significant developments in October was the moderation in inflationary pressures faced by services companies. Input prices increased at their slowest pace since August 2020, bringing the rate of cost inflation to its lowest level in more than six years.

Although some businesses continued to report higher expenditure on electricity, transportation, labour and raw materials, the overall increase in operating costs remained modest compared with previous months. The moderation provided relief to service providers by reducing pressure on operating expenses and helping businesses manage costs more effectively.

The easing of input cost inflation was also reflected in prices charged to customers. Selling price inflation declined to its weakest level since June 2026, with fewer than 3% of surveyed service providers reporting increases in their charges during October.

Finance and insurance companies experienced the lowest input cost inflation among the surveyed service categories, while consumer services recorded comparatively greater cost pressures.

The moderation in both input and output price inflation indicated a more favourable operating environment for service providers, allowing businesses to expand activity without facing the same degree of cost escalation experienced during earlier periods.

Export Orders and Employment Continue to Expand at a Slower Pace

While domestic demand remained strong, the survey indicated a moderation in the growth of international business. New export orders continued to increase during October, although their pace of expansion slowed to the weakest level since February 2023.

The divergence between domestic and overseas demand highlighted the importance of India’s internal market in supporting services sector activity. Stronger domestic orders helped sustain overall business growth despite relatively subdued expansion in international sales.

Employment in the services sector also continued to increase, but the pace of job creation moderated to its weakest level since June. Survey findings suggested that some businesses were able to accommodate additional demand through their existing workforce, reducing the immediate requirement for additional recruitment.

Despite the slower pace of hiring, continued employment growth indicated that service providers were maintaining operational capacity while responding to changing business requirements. Companies also reported a reduction in outstanding workloads, reflecting their ability to process new orders alongside existing commitments.

Composite PMI Rises to 56.2 as Private Sector Growth Strengthens

The improvement in services activity contributed to stronger overall growth across India’s private sector during October. The HSBC India Composite PMI Output Index, which measures combined manufacturing and services activity, increased to 56.2 from 55.9 in September.

The October reading represented the strongest expansion in aggregate private sector output in four months, supported primarily by the acceleration in services activity. Manufacturing continued to expand, although its pace of growth moderated compared with the previous month.

New business across the combined manufacturing and services sectors increased at its fastest pace since June, reflecting sustained demand for Indian goods and services. Inflationary pressures also moderated across the broader private sector, contributing to a more stable operating environment.

The composite index demonstrated that India’s economic activity continued to expand across both major segments of the private economy, with services providing additional momentum during October.

Services Sector Maintains Positive Growth Outlook

Indian service providers remained optimistic about business activity over the coming 12 months, supported by expectations of continued demand and opportunities for new customer acquisitions. However, the level of business confidence declined from September and remained below its long-term average.

The October PMI findings nevertheless reflected several positive developments for the Indian economy, including stronger domestic sales, broad-based growth across service industries and a substantial easing of inflationary pressures.

With services activity reaching a four-month high and the composite PMI also strengthening, the latest survey highlighted the continuing contribution of the services economy to India’s overall economic expansion. The combination of resilient domestic demand and moderating operating costs provided a favourable foundation for business activity entering the final months of 2026.

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