By Siddhi Nawar
India’s service sector experienced robust expansion in February, with the Purchasing Managers’ Index (PMI) rising to 59.0, a significant improvement from January’s 26-month low of 56.5, according to an HSBC report. This growth was fueled by strong domestic and international demand, with orders increasing from clients across Africa, Asia, Europe, America, and the Middle East.
The surge in demand led to a notable acceleration in output and a sharp increase in employment.
While businesses reported higher cost burdens, inflation eased to a four-month low. Productivity improvements, strong underlying demand, and higher new business intake were key factors driving output growth.
Sales performance also contributed significantly to the expansion, with February witnessing a historically strong upturn, surpassing January’s growth.
Surge in Output and Employment
To manage the rising inflow of new business and address capacity constraints, Indian service firms actively pursued recruitment efforts. Employment levels rose sharply, marking one of the fastest hiring rates since data collection began in December 2005, with both full-time and part-time staff being recruited.
Commenting on the HSBC India Services PMI, Pranjul Bhandari, Chief India Economist at HSBC, stated, “India’s services business activity index increased to 59.0 in February 2025, a notable jump from January’s 26-month low of 56.5. The rapid expansion in global demand, which saw its fastest growth in six months according to the new export business index, played a pivotal role in driving the sector’s output growth. Job creation and charge inflation remained strong throughout the month. Looking forward, business sentiment remains largely positive, though it dipped slightly to its lowest level since August 2024.”
Sectoral Cost Pressures and Pricing Trends
Among the four key service sub-sectors analyzed in the report, Consumer Services faced the highest cost pressures. Meanwhile, firms in the Transport, Information & Communication sectors recorded the steepest increase in selling prices.
Rising Backlogs Despite Employment Growth
Despite ongoing recruitment drives, Indian service providers continued to experience rising backlogs in February. Outstanding business volumes grew at the joint-fastest pace since May of the previous year, matching the levels observed at the beginning of 2025.
Looking ahead, businesses remain optimistic about future output growth, supported by increased advertising, stronger customer relationships, operational efficiency gains, and sustained demand. Approximately one-quarter of surveyed firms expect further expansion over the next year, while fewer than 2% expressed pessimism.
Movement of Services PMI so far
