India’s services sector expanded at its fastest pace in five months in April, driven by robust domestic demand even as international orders softened amid the West Asia crisis, according to a monthly survey released on Wednesday.
The seasonally adjusted HSBC India Services PMI Business Activity Index rose to 58.8 in April from 57.5 in March, marking the strongest expansion since last November and signalling sustained momentum in the sector.
The HSBC India Services PMI Business Activity Index is based on a single question asking how the level of business activity compares with the situation the month before. In Purchasing Managers' Index (PMI) terms, a reading above 50 indicates expansion, while a figure below 50 denotes contraction.
Survey participants attributed the growth in activity to competitive pricing, the rise of e-commerce, and strong customer demand, particularly for relocation and logistics services.
"India's services PMI climbed to a five-month high of 58.8 in April. Activity and new orders strengthened, even as new export orders eased, suggesting that demand is rotating from overseas markets to domestic consumers amid the Middle East conflict," said Pranjul Bhandari, Chief India Economist at HSBC.
However, international demand for Indian services weakened during the month, with firms citing the war in the Middle East and subdued inbound tourism as key factors weighing on export growth.
On the cost front, service providers continued to face elevated operating expenses. Although the pace of inflation eased in April, it remained among the highest levels seen since November 2024. Companies reported higher costs for food items such as cooking oil, eggs, meat and vegetables, alongside rising gas and labour expenses, as well as gas shortages.
Despite these pressures, firms passed on only a portion of the increased costs to customers, resulting in a slower rise in selling prices. Overall charge inflation eased to a three-month low.
"Input cost inflation moderated but remained elevated, while output price inflation stayed subdued, indicating that some firms are absorbing higher costs rather than passing them on," Bhandari said.
Looking ahead, services companies remained optimistic about output growth over the next 12 months, although sentiment weakened compared to March due to concerns over the West Asia crisis and persistent cost pressures.
Hiring activity also picked up at the start of the new fiscal year, with companies adding short-term staff and junior-level employees to manage rising volumes of new business.
Meanwhile, the HSBC India Composite PMI Output Index increased from 57.0 in March to 58.2 in April, indicating a strong rate of expansion, although the pace of growth was among the slowest seen in about two-and-a-half years.
Composite PMI indices are weighted averages of comparable manufacturing and services PMI indices.
The HSBC India Services PMI is compiled by S&P Global based on responses from around 400 service sector companies, covering industries such as consumer services (excluding retail), transport, information and communication, finance, insurance, real estate, and business services.