India’s Services Sector Hits Record Growth in August
India’s services sector witnessed its sharpest expansion in 15 years during August 2025, marking a remarkable phase of economic momentum. The HSBC India Services Purchasing Managers’ Index (PMI), compiled by S&P Global, surged to 62.9 from 60.5 in July. While slightly lower than the preliminary estimate of 65.6, this reading firmly signals robust growth, far above the neutral 50.0 threshold.
Drivers of Growth: New Orders and Global Demand
The surge was largely fueled by a sharp rise in new business. Domestic demand remained strong, while international demand also picked up, with export orders climbing at the fastest pace in 14 months. This dual boost reflected India’s strengthening position in global services markets, with IT, finance, and consulting sectors leading the momentum.
Inflation Concerns Resurface
However, rapid expansion brought with it renewed price pressures. Input costs rose at the steepest pace in nine months, while service providers passed these costs on to consumers at the fastest rate since July 2012. Output price inflation has reached worrying levels, raising concerns that India’s broader inflation, which hit an eight-year low of 1.55% in July, may now reverse course.
Business Confidence on the Rise
Despite inflation challenges, optimism among service firms improved to a three-month high. Companies expressed confidence in future demand, supported by expansion plans, advertising investments, and expectations of sustained client activity. Still, hiring growth remained modest, suggesting that businesses are cautious about expanding their workforce amid rising cost pressures.
Composite PMI Highlights Broad-Based Growth
The economic surge was not limited to services alone. The Composite PMI, which accounts for both manufacturing and services activity, rose to 63.2 in August — its highest in 17 years. This indicates that India’s economic momentum is well-rounded, supported by both domestic consumption and international business opportunities.
External Risks to Watch
Amid this optimism, external risks loom large. The U.S. government’s recently imposed 50% tariff on Indian goods could dampen future growth prospects, particularly if trade tensions escalate. Balancing domestic demand with global headwinds will be critical for sustaining momentum in the coming quarters.
