India’s services growth cools in September after 15-year high as global demand softens

NEW DELHI: India’s services sector cooled in September after hitting a 15-year high in August, as growth in new orders and output eased amid softer export demand and heightened global competition, a private survey showed on Monday.

The HSBC India Services Purchasing Managers’ Index (PMI), compiled by S&P Global, slipped to 60.9 in September from 62.9 in August, following readings of 60.5 in July and 60.4 in June. The index has now remained above the 50-point mark that separates expansion from contraction for more than four years, underscoring the sector’s enduring momentum.

Despite the dip, September was the fourth straight month with the index above 60, signalling strong business expansion and resilient demand.

“Anecdotal evidence showed that demand buoyancy and new business gains, alongside tech investment and favourable public policies, supported the rise in output,” the survey said. “Barriers to growth featuring in panel member reports included competitive conditions and cost-control measures,” it added.

To be sure, President Donald Trump’s policies have created headwinds for India’s services sector, particularly IT and outsourcing. Stricter H-1B visa norms and sharply higher application fees have raised costs and restricted the mobility of Indian professionals in the US, while talk of “reciprocal tariffs” on digital services has added uncertainty.

Coupled with tighter US spending and rising protectionism, Indian IT firms face slower deal conversions and margin pressures. Yet, the push for cost efficiency is prompting US clients to expand offshore delivery and Global Capability Centres in India, offering a partial offset and accelerating a shift toward more remote, high-value work.

The HSBC India Services PMI is based on a survey of around 400 firms across diverse service industries, including consumer services (excluding retail), transport, information and communication, finance, insurance, real estate, and business services.

"Business activity in India’s services sector eased in September from the recent high August level. Most trackers moderated, but nothing in the survey suggested there is a big loss in growth momentum in services,” said Pranjul Bhandari, chief India economist at HSBC.

“Instead, the Future Activity Index rose to its highest level since March, indicating strengthening optimism among services companies about business prospects,” she added.

Manufacturing momentum also eases

India’s manufacturing engine also lost some steam in September, easing from a 17-year high the previous month and expanding at its slowest pace in four months.

The HSBC India Manufacturing Purchasing Managers’ Index (PMI), compiled by S&P Global, slipped to 57.7 in September from 59.3 in August and 59.1 in July, compared with 58.4 in June, 57.6 in May, and 58.2 in April. Despite the moderation, a reading above 50 still indicates expansion.

The HSBC India Composite PMI Output Index slipped to 61.0 from 63.2 in August, its weakest level since June, but remained well above both the long-run average and the neutral 50 mark, signalling continued expansion.

The moderation reflected a broad-based slowdown across manufacturing and services, with new orders, international sales, business activity, and employment all rising at a slower rate.

“In addition to a broad-based slowdown in growth of output across the manufacturing and service sectors, there were softer increases in new orders across the two segments. At the composite level, total sales rose at the softest pace in three months,” the survey said.

“Inflation trends were mixed, with faster increases in expenses and selling prices at manufacturers contrasting with slower rises in the service economy. Across the private sector, costs and charges rose at the slowest rates in two and three months respectively,” it added.