Services PMI Rises To 58.5 In January 2026 As Demand And Hiring Pick Up

India’s services activity remained comfortably in expansion territory in January, extending the sector’s growth streak into the new calendar year.

A PMI reading above 50 indicates expansion, and the latest print of 58.5 signals sustained momentum across businesses. The improvement, though marginal on a month-on-month basis, shows that demand conditions stayed resilient despite global uncertainty and mixed external cues.

Output growth was supported by a steady pipeline of projects and continued customer spending across segments.

New Orders Strengthen

Fresh business inflows improved in January after moderating towards the end of 2025. Companies reported higher customer enquiries and better conversion rates. Several firms attributed the rise to stronger marketing efforts, improved digital presence and repeat orders from existing clients.

Among sub-sectors, financial services and insurance recorded some of the fastest gains in order books, reflecting steady activity in transaction volumes and advisory services. The faster pace of new business indicates that demand remains broad-based rather than limited to a few pockets.

Export Demand Gains Traction

International demand also provided support. While domestic orders remained the primary growth driver, services exports recorded their strongest increase in three months. Firms reported new contracts from markets across South and Southeast Asia and parts of the Middle East. This trend highlights improving external demand for Indian services, particularly in technology, consulting and back-office operations, where Indian firms continue to maintain a competitive position.

Hiring Activity Resumes

Employment trends turned positive during the month. Service providers resumed hiring after a relatively cautious December. Recruitment, however, remained measured rather than aggressive. Most firms indicated that existing staff capacity was largely adequate, and only selective additions were required to manage incremental workloads.

Backlogs of work remained broadly stable, suggesting that demand growth was being handled without significant strain on operations.

Input Costs Rise Moderately

On the cost front, businesses faced higher expenses for several inputs. Prices of food products, electronic goods, paper and spare parts increased during the month. As a result, input cost inflation rose to its fastest pace since September.

Despite this uptick, overall price pressures were still described as moderate compared with historical averages.
Many firms were able to pass on part of the higher costs to clients, leading to a gradual increase in output charges.

Business Confidence Improves

Sentiment among service providers strengthened. Business confidence climbed to a three-month high, with companies expressing optimism about sustained demand, operational efficiency gains and new client acquisitions. Firms also pointed to technology investments and process improvements as factors likely to support margins and productivity in the coming months.

Composite Growth Remains Firm

The broader composite PMI, which combines manufacturing and services activity, also improved to 58.4 from 57.8 in December. The rise suggests that growth remains synchronised across sectors, with both goods and services contributing to overall economic momentum.