SUMMARY

India's services sector sustained robust growth in May 2025, with the HSBC India Services Purchasing Managers' Index (PMI) edging up to 58.8 from April's 58.7, marking nearly four consecutive years above the 50-point threshold that indicates expansion.

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This growth was driven by strong new business inflows, attributed to advertising efforts and repeat clientele, as well as a significant surge in export orders, one of the largest in the survey's history. In response, nearly 16% of firms increased staffing—the highest hiring rate since the survey began in 2005. 

However, this expansion came with rising price pressures. Both input costs and output charges climbed, driven by higher expenses for cooking oil, materials, meat, and overtime payments, resulting in the steepest input price inflation since January.

These inflationary pressures pose challenges for the Reserve Bank of India (RBI), which has already cut interest rates by 50 basis points this year and is expected to reduce them further to 5.75%. 

Despite cost concerns, business confidence rebounded from an April low, with optimism surrounding continued growth due to workforce expansion, client retention, and marketing activities.

The overall HSBC India Composite PMI, which includes both manufacturing and services, eased slightly to 59.3 in May from 59.7 in April but still indicated continued strong expansion in private sector activity.

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