Service sector activity slightly eases in February; exports pick up: PMI
Despite this, services activity remained strong. HSBC India Services Business Activities Index decreased slightly to 58.1 in February from 58.5 in January. In February 2025, this figure was 59. Survey participants attributed continued growth to productivity gains, positive underlying demand, increased sales and technology projects.
A reading above 50 indicates expansion in activity, while below indicates contraction.
“India’s Services PMI was recorded at 58.1 in February, largely unchanged from 58.5 in January, signaling another month of strong expansion in the sector,” said Pranjul Bhandari, chief India economist at HSBC.
Meanwhile, manufacturing also accelerated. Manufacturing PMI rose from 55.4 in January to 56.9 in February, its highest level in four months, supported by strong domestic demand.
Overall, India’s composite PMI, which combines manufacturing and services, rose from 58.4 to 58.9.
“Overall, the composite PMI rose to 58.9, reflecting the fastest growth in private sector activity in the last three months, driven by strong momentum in manufacturing,” Bhandari said. Looking ahead, positive sentiment rose to a one-year high as service providers expressed optimism about the year ahead. Companies cited marketing initiatives and concerted efforts to expand coverage and presence in existing and new markets as key drivers of trust.
Although new orders continued to increase in the services sector, the rate of increase fell to the lowest level in 13 months. While some companies have benefited from increased customer demands and marketing, others have cited increased competition as a barrier to growth.
Of the four sectors tracked, the finance and insurance sector recorded the fastest increase in production and new orders, despite some slowdown in expansion rates. Real estate and business services supported the rankings in these areas.
“As new order growth fell to a 13-month low amid increased competition, service providers saw a significant increase in international sales and responded with increased hiring to meet operational needs,” Bhandari said.
International sales stood out as a bright spot, with companies reporting earnings from markets such as Canada, Germany, mainland China, Singapore, the UAE, the UK and the US. On average, export growth reached its strongest level since last August.
On the cost side, operating expenses increased at the highest rate in the last two and a half years in February. Panelists noted that the main source of cost pressures is greater expenditure on energy, labor and commodities, along with food (edible oil, eggs, meat and vegetables).
Service providers also increased their prices at the fastest rate in the last six months. Improved output prospects supported a faster rise in employment; Job creation, although moderate, is above the long-term average.
“Input and output price inflation accelerated as firms passed on higher spending, especially on food and labor, to customers, but business confidence climbed to a one-year high as companies sought to expand their presence in the market,” Bhandari said.
