CHENNAI: India’s services sector continued to expand in December 2025 but showed clear signs of losing momentum, with the latest HSBC India Services Purchasing Managers’ Index (PMI) slipping to an 11-month low as growth in new business softened. The index eased from November’s robust reading, indicating that while activity remained firmly in expansion territory, the pace of growth moderated meaningfully toward the end of the year.
The slowdown was primarily driven by a deceleration in new orders, which rose at the weakest rate in nearly a year. Firms reported that domestic demand, while still positive, had become more measured amid intensifying competition and a more cautious client environment. This easing in fresh business weighed on overall output growth, prompting service providers to adopt a more restrained approach to capacity expansion.
A notable feature of the December data was the pause in employment growth. After a prolonged period of continuous hiring, service sector firms largely kept staffing levels unchanged, and in some cases trimmed headcount marginally. This shift suggested that companies were becoming more guarded in their outlook, choosing to optimise existing resources rather than expand aggressively in the face of slower order inflows.
Business sentiment also weakened further, with confidence about future activity falling for a third consecutive month to its lowest level in several years. Respondents pointed to heightened competition, uncertainty over demand sustainability and market volatility as factors weighing on their outlook. The softer confidence readings signalled that firms were less certain about the strength of growth as they moved into 2026.
Despite the moderation in domestic momentum, external demand remained a bright spot. New export orders rose at a stronger pace, supported by steady interest from overseas markets including Asia, North America, the Middle East and the UK. This resilience in international demand helped cushion the impact of slower domestic growth and highlighted the growing role of exports in supporting India’s services sector.
Inflationary pressures remained relatively subdued. Input costs increased only modestly and were below long-term averages, while output price inflation stayed weak as firms largely refrained from passing higher costs on to customers. The contained pricing environment reflected both easing cost pressures and the competitive landscape, which limited firms’ ability to raise prices.
Overall, the December PMI data pointed to a services sector that remained resilient but was clearly transitioning into a slower growth phase. While expansion continued at a healthy level, the combination of easing new orders, stalled hiring and softer business confidence suggested that the strong momentum seen earlier in 2025 was fading. Continued support from export demand and benign inflation offered some stability, but the data underscored a more cautious and measured outlook for the services economy heading into the new year.