India’s Services Growth Slows to 11-Month Low, Signaling Caution for Economy

India’s services sector expanded in December 2025, but at its slowest pace in 11 months, according to the HSBC India Services Purchasing Managers’ Index (PMI). A decline in new business orders and softening domestic demand led to stagnation in employment, though robust export demand provided some support.

Domestic Demand and New Orders Decline
The slowdown was primarily driven by reduced new orders, which grew at their weakest pace in nearly a year. Companies reported that while domestic demand remained stable, rising competition and cautious customer behavior contributed to slower growth. As a result, service providers moderated capacity expansion plans.

Employment and Business Sentiment Weak
Employment growth halted in December, marking a pause after a prolonged hiring phase. Several firms maintained staff levels, while some reduced headcount slightly, indicating increased caution amid uncertain business conditions. Business confidence also weakened for the third consecutive month, falling to a multi-year low due to heightened competition, demand uncertainty, and market volatility.

Exports Provide a Silver Lining
Despite subdued domestic activity, export demand remained strong. Orders from Asia, North America, the Middle East, and the UK helped offset some of the domestic slowdown, highlighting the growing role of international markets in supporting India’s service sector.

Inflation and Cost Pressures Remain Low
Inflationary pressures remained modest. Input costs saw only slight increases, well below long-term averages, while output price inflation stayed weak as companies avoided passing higher costs onto customers.

Outlook
Overall, while India’s services sector remains resilient, the PMI data clearly indicates a deceleration in growth. Slower new orders, stagnant employment, and weakening business confidence suggest that the robust pace seen earlier in 2025 is easing. Export demand and low inflation provide some stability, but the sector faces a more cautious and measured outlook as it enters 2026.