Services Sector Growth Sees Six-Month High in May Amid Improved Demand

The Indian service sector reported its best growth in six months in May as the healthy demand environment and business activities resulted in strong growth, said the latest HSBC India Services Purchasing Managers' Index (PMI) compiled by S&P Global.

Invest in Indian Markets and Unlock Future Potential With 5paisa!

Open Account Now

The Services PMI index was at 59.8 in May compared to 58.8 in April. It is the highest value seen since November 2025. Any PMI reading above 50 implies growth in activity, while less than 50 implies contraction in activity.

Demand Supports Business Activity

The survey showed that stronger demand across several service segments helped boost new business volumes during the month. More client activity was noted by firms which in turn led to stronger output growth and more pressure on operations.

According to S&P Global, sectors such as freight, digital services, e-commerce, entertainment, and information technology contributed to the rise in new business generation. The improvement in demand encouraged firms to expand activity levels at a faster pace compared with the previous month.

The latest reading extends the services sector’s growth streak and highlights the resilience of domestic demand despite ongoing global economic uncertainties.

Hiring Activity Continues

Companies also went ahead to hire workers in May as they addressed growing demands and needs for their businesses. According to the survey, there was a rise in employment levels owing to increased business activities and orders. 

There was an increase in employment levels since the companies needed more personnel to meet their expanding needs. It is clear that the level of hiring indicates confidence on the part of businesses in the coming months.

Cost Pressures Ease

While input costs remained elevated, the pace of cost increases moderated during May. Survey data showed that inflationary pressures across the services economy eased to a four-month low. However, lower cost increases did help somewhat, as firms had experienced rising costs over the past few months.

With reduced cost increases for inputs, sellers increased their prices at a more moderate rate. Output charge inflation eased to its lowest level since January, indicating a more measured pass-through of costs to customers.

Services Sector Remains A Key Growth Driver

The services industry continues to make its presence felt as an important contributor to the economic activities of the country, adding value to sectors such as tech, logistics, banking, and consumer businesses, among others.

According to the information from the May PMI report, the state of demand during the month was favorable, enabling businesses to boost production alongside expanding their workforces. On the other hand, decreasing costs provided some breathing room for the businesses after experiencing periods of high inflation. The Services PMI is reported to be significantly above the 50 point and at a six-month high.