India’s Services Sector Growth Slows to Five-Month Low in October Amid Heavy Rain and Competition

India’s services sector experienced a slowdown in growth in October 2025, with the HSBC India Services Purchasing Managers' Index (PMI) falling to 58.9 from 60.9 in September. This marks the slowest pace of expansion since May but still indicates strong growth as the index remains well above the 50 threshold that separates expansion from contraction.

The moderation in growth was attributed mainly to competitive pressures and heavy rains that dampened business momentum. Firms reported that while client footfall increased and Goods and Services Tax (GST) relief continued to support activity, the challenging external environment weighed on new business intake, which rose sharply but at the weakest pace in five months. International sales also grew but at the slowest rate since March, signaling steady yet moderating overseas demand for Indian services.

Cost pressures showed signs of easing, with input costs rising at their slowest pace in 14 months. Firms noted higher spending on items such as fruits, vegetables, maintenance, and construction materials, but GST reforms helped curb price pressures. Correspondingly, output charges increased at the slowest rate in seven months, with fewer than 5 percent of respondents indicating higher prices.

Employment in the services sector saw a modest increase, with firms adding staff to meet delivery deadlines and maintain service reliability. This hiring helped reduce outstanding workloads for the first time in nearly four years. Despite the slowdown in growth, service providers remained optimistic about future business activity, driven by expectations of stronger demand, enhanced advertising, and competitive pricing strategies. However, overall optimism slipped to a three-month low due to concerns over competition and weather disruptions.

The broader economy, reflected in the HSBC India Composite PMI, which combines services and manufacturing sectors, also showed signs of moderation. The composite PMI output index declined slightly from 61.0 in September to 60.4 in October, its lowest level since May. While manufacturing growth accelerated, the services sector’s slowdown pulled down the overall index.

This development points to emerging challenges ahead for India’s economy, especially as competition intensifies and external factors like weather continue to impact business conditions, despite ongoing reforms and resilient demand.