Growth in India’s services sector slowed in June, as the HSBC India Services Purchasing Managers’ Index (PMI) Business Activity Index dipped to 57.4 from 59.8 in May, on the back of weakening domestic demand and slowing growth in new business orders. Even so, the index was still above the 50 mark, signaling a pickup in business activities.

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Domestic Demand Slows

In Friday’s HSBC India Services PMI report, June represented the slowest increase in services activities in 17 months. The slowdown was primarily driven by the weakest increase in new orders in more than two-and-a-half years, as several companies reported subdued client enquiries and challenging market conditions.

Some firms, however, continued to benefit from competitive pricing, stronger e-commerce demand, higher customer bookings and improved local tourism, helping sustain overall growth despite softer domestic conditions.

Commenting on the survey, Pranjul Bhandari, Chief India Economist at HSBC, said the services sector remained in expansion territory, although the pace of growth moderated to its lowest level in 17 months. She noted that domestic demand weakened during the month, while overseas demand remained resilient, with export orders rising at the fastest pace in three months.

Export Demand Remains Resilient

International business continued to support the sector during June. The survey showed that new export orders increased at the quickest pace in three months, aided by stronger demand from customers in Australia, Belgium, Canada, Germany, Malaysia, Nepal, Oman, Qatar, Singapore, the UAE and the U.S.

Hiring activity, however, remained largely unchanged. After stronger recruitment in April and May, service providers indicated that existing workforce levels were sufficient to meet current business requirements. Outstanding business volumes also remained broadly stable during the month.

Inflation Pressures Ease Further

Cost pressures moderated in June, with input cost inflation easing to a five-month low. Companies continued to report higher expenses related to electricity, food, fuel and transportation, although the pace of increase slowed compared with previous months.

Selling prices also rose at the slowest pace since November 2025 and remained below the long-term average. Among the monitored segments, consumer services recorded the highest increase in both input costs and prices charged, even as inflation softened from May levels.

Composite PMI Also Moderates

The broader HSBC India Composite PMI Output Index, which combines manufacturing and services activity, declined to 57.1 in June from 59.3 in May. The latest reading signalled the slowest pace of private sector growth since March.

The survey also showed softer increases in employment, new orders and overall business activity across both manufacturing and services. Business confidence remained positive for the coming year but slipped to a five-month low, with companies citing competition, challenging economic conditions and rupee depreciation as factors that could affect future growth, while continued investment and new client acquisitions supported the overall outlook.