India’s services sector growth moderated in December, as the pace of expansion in new work and output slowed to an 11-month low, with companies holding back on hiring additional staff, according to a monthly survey released on Tuesday.

The seasonally adjusted HSBC India Services PMI Business Activity Index fell from 59.8 in November to 58.0 in December, marking the slowest rate of expansion since January. In the Purchasing Managers’ Index (PMI) framework, a reading above 50 indicates growth, while a score below 50 signals contraction. While firms remained optimistic about future growth, overall sentiment dropped to its lowest level in nearly three-and-a-half years, the survey said.

“While India's service sector continued to perform well in December, the retreat in several survey indicators as 2025 ended may suggest a moderation in growth heading into the new year,” said Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence.

In terms of external demand, companies surveyed reported further improvements, with gains from Asia, North America, the Middle East, and the UK. New export orders rose at a marked pace.

On the price front, increases in input costs and output charges remained modest.

“What bodes well for the outlook is the benign inflation environment. If services firms continue to see only mild increases in their expenses, they should be better positioned to compete and limit price hikes, thereby boosting sales and creating more jobs,” Lima said.

Despite optimism for growth in 2026, the overall level of positive sentiment among Indian services companies declined for the third consecutive month, hitting its lowest point in nearly three-and-a-half years amid heightened market uncertainty and concerns over exchange rate movements.

“Companies did express some anxiety about market uncertainty and exchange rate movements. While recent rupee weakness may have driven import costs higher, it likely made exports more competitive. Notably, against the wider trend of slowing growth, services exports rose to a greater extent in December,” Lima added.

Meanwhile, private sector output growth fell to an 11-month low in December. The HSBC India Composite PMI Output Index dropped from 59.7 in November to 57.8 in December, the weakest since January 2025, reflecting slowdowns in both manufacturing and services.

Composite PMI indices are weighted averages of manufacturing and services PMIs, with weights based on the relative size of each sector according to official GDP data.

India’s private sector also continued to record modest increases in input costs and output charges. Job creation at the composite level stalled in December, amid slower growth among goods producers and minor job losses in services, the survey noted.

Looking ahead, private sector companies remained optimistic about growth prospects, although the level of sentiment fell to a 41-month low, the survey added.