India’s Services PMI Reaches Four-Month High of 55.8 in October Amid Slowing Job Growth

India’s services sector saw improved business conditions in October, with the Purchasing Managers’ Index (PMI) rising to 55.8, a four-month high, according to a survey report by S&P Global. The PMI, which is derived from responses gathered from purchasing managers at 400 firms, indicates expansion when it reads above 50 and contraction when it falls below 50.

Pranjul Bhandari, HSBC’s Chief India Economist, noted that while business conditions improved cautiously and overall demand remained strong, new export orders recorded their slowest pace of expansion since February 2023. The domestic market served as the primary source of sales growth during the month.

The survey results indicated that all four broad areas of the service economy tracked by the PMI survey recorded faster expansions in new business and output. Among them, Finance & Insurance led in both new business and output, while Real Estate & Business Services ranked last.

Despite the broader expansion in activity, the job market displayed less optimistic trends. Services companies worked through their backlogs, with unfinished business volumes decreasing for the third time in the past four months. Consequently, employment growth eased during October. The rate of increase marked the joint weakest in the current ten-month period of job creation and was described as fractional overall. Bhandari added that the slower employment growth suggests certain service sector businesses currently possess sufficient capacity to meet their staffing requirements.

On the cost front, businesses received some relief as input costs rose at a negligible pace, marking the weakest increase in over six years and falling well below its historical trend. While some firms reported higher outlays for electricity, labour, raw materials, and transportation, cost pressures were most intense in the Consumer Services segment, whereas the softest rate of inflation was recorded in Finance & Insurance.

Reflecting these modest cost pressures, fewer than 3% of Indian service providers opted to increase their selling prices at the start of the third fiscal quarter, passing on cost increases to clients at a marginal and overall slowest rate-of-charge inflation since June.

Regarding future expectations, respondents maintained confidence that output would rise over the coming 12 months. However, the survey noted that the overall level of positive sentiment declined in October and remained below its long-run average.

"The October services PMI data highlights a resilient domestic market driving steady business expansion in India, even amidst cautious global conditions. While the rise to a four-month high of 55.8 is encouraging for business activity and modest input cost inflation, the simultaneous slowdown in hiring and export orders signals that companies are prioritizing operational efficiency and existing capacity over rapid expansion. Founders and entrepreneurs should closely monitor these mixed demand indicators and manage working capital prudently as they plan their growth strategies for the upcoming quarters." — Dr. Shishir Gupta, Founder & CEO, StartupLanes