India's Services Sector Growth Reaches Four-Month High in October on Domestic Demand

India's dominant services sector expanded at its quickest pace in four months in October, supported by improved domestic demand that boosted new business. At the same time, hiring turned subdued as international orders weakened, according to a survey released on Wednesday.

The HSBC India Services Purchasing Managers' Index (PMI) rose to 55.8 in October from 55.2 in September. While this indicated an acceleration in the sector, the figure remained below the preliminary estimate of 56.2. In the PMI scale, a reading above 50.0 indicates expansion, while a reading below 50.0 denotes contraction.

New business, a key gauge of demand, increased at its fastest rate since June, primarily driven by strong domestic orders. In contrast, international demand remained muted, with growth in new export business matching its weakest pace in 45 months.

Reflecting the cautious approach of businesses amid softening international demand, employment growth almost stalled. Hiring matched the pace recorded in June, marking the slowest rate of job creation in 10 months.

On the price front, inflationary pressures weakened during the month. Prices charged to customers rose at their slowest pace in four months. Input cost inflation also eased to its lowest rate in over six years, even though companies continued to report higher costs related to electricity, labour, raw materials, and transportation.

Despite the growth in output, business confidence slipped from September levels. The index remained below its long-run average, signalling cautious optimism among service providers regarding future growth prospects.

Meanwhile, the broader economic picture showed a slight improvement. The overall composite PMI index, which tracks both manufacturing and services, rose to its highest in four months, reaching 56.2 in October compared to 55.9 in September. This came as PMI manufacturing dropped to 54.7 in October.

"The latest PMI data highlights a clear divergence in the market, where robust domestic demand is successfully driving services growth while international headwinds continue to pose challenges. For businesses and entrepreneurs, this domestic resilience provides a stable foundation, but the subdued hiring trends and cautious business confidence suggest that operational efficiency and cost management remain critical. Companies must carefully balance their capacity investments while navigating these global uncertainties." — Dr. Shishir Gupta, Founder & CEO, StartupLanes