India Services PMI Dips to 11-Month Low in Dec 2025 Amid Order Slowdown

The Indian services sector continued its strong growth, expanding by 58.0, down from 59.8 in November. This is the weakest performance for the sector over the last eleven months, according to S&P Global. Although it remains above the 50.0 mark, it is still considered expansionary.

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New Orders Face Headwinds

Although new orders continued to rise, they did so at their slowest pace in eleven months due to the increased number of alternatives available to customers. There were also concerns regarding competition, with companies attributing lower levels of new order growth to steady customer demand, greater competition (in terms of lower prices) and more available supplier options.

Export Strength Bucking the Trend

While domestic orders saw continued softening in December, export orders continued to accelerate and exceeded prior month sales. The combination of continued strong demand for exports from businesses in Asia, North America, the Middle East, and the UK, combined with the competitive advantage created by the rupee's depreciation, benefited export businesses significantly, although businesses did express concern about foreign exchange rate volatility and uncertainty in the marketplace.

Hiring Stalls Amid Capacity Ease

Employment activity was consistent with the stabilisation of capacity within many companies, as most companies maintained their current levels of employee staffing, while a small number reduced their employee numbers slightly. The absence of capacity pressure due to the continued decline in demand for new orders during the month may explain why companies were not hiring to the same extent that they had been previously."

Composite PMI Signals Broader Cooling

The HSBC India Composite PMI Output Index fell to 57.8 in December compared to 59.7 in November, reaching its lowest level since January 2025. This decline is occurring against the backdrop of weaker momentum in the Manufacturing and Services sectors within the Private Sector as well. Private sector job creation has temporarily stalled out. Input costs and output prices are both slightly higher than in previous months, and Business Optimism has reached a low point (41 months) because of currency fluctuations and uncertainty about Economic Conditions.

2026 Outlook 

This slowing down of activity will cap a record year (2025) for the Services Sector, which grew due to Digital Exports and a Domestic Recovery from the Pandemic. We are experiencing low inflation, and therefore, we will have Price Power for all items produced. We may be able to sustain some level of service Export Competitiveness, given that the Export Resilience offsets Domestic Weakness, and this is consistent with India's $1 Trillion Service Export Targets. Policymakers are closely monitoring Rupee Trends and Global Demand for Services, given that we expect the Services PMI to be closely correlated (historically >0.8) with GDP Growth rates.