In February 2025, India’s services sector expanded rapidly due to high demand both domestically and abroad. The industry had a dramatic increase in business activity, which led to a considerable gain in output and employment, according to the most recent HSBC India Services PMI survey.
Significant Growth in Services Activity
Following a 26-month low of 56.5 in January, the seasonally adjusted HSBC India Services PMI Business Activity Index jumped to 59.0 in February. An expansion is indicated by a PMI number above 50, and a contraction is shown by a figure below 50. The index’s spike demonstrates the services sector’s resilience and increasing contribution to India’s economic momentum, as well as its quick rate of expansion.
Growth-Driven Factors
Global demand was a major factor in this development, according to Pranjul Bhandari, Chief India Economist at HSBC. Stronger demand from markets in Africa, Asia, Europe, the Americas, and the Middle East was reflected in the new export business index, which expanded at the quickest rate in six months. Good underlying demand, increased productivity, and more new business were the main drivers of the services sector’s remarkable development.
The general optimistic attitude was also influenced by advertising, enhanced customer interactions, efficiency improvements, and robust demand circumstances. The industry is well up for long-term growth as companies concentrate on increasing consumer engagement and operational efficiency.
Record-High Employment Growth
Indian service providers increased their hiring efforts in order to meet the growing demand and relieve capacity constraints. The services industry saw one of the fastest rates of employment growth since data gathering started in December 2005. The industry’s positive outlook and the necessity to bolster the workforce in order to maintain momentum are reflected in the hiring boom.
Business confidence, however, somewhat decreased to its lowest level since August 2024 in spite of the upbeat sentiment. Although the industry is optimistic about its future expansion, worries about market volatility and economic stability still exist.
Strengthening of the Composite Output Index
Data from the manufacturing and services sectors are combined in the HSBC India Composite Output Index, which increased from 57.7 to 58.8 in February. This substantial rise suggests widespread economic growth in both industries. Businesses experienced some respite as payroll figures in the private sector grew and cost pressures decreased to their lowest points since October 2024.
The Economic Prospects and Growth Forecasts for India
Macroeconomically speaking, India’s economy recovered from a seven-quarter low to grow by 6.2% in the December quarter. This was still less than the growth that was noted the year before, though.The Indian government projects 6.5% GDP growth for the fiscal year 2024–2025, which is marginally higher than its original forecast of 6.4% but much less than the 9.2% growth seen in 2023–2024.
Even if growth rates have slowed, India’s economy is still growing at the quickest rate among major economies. A robust economic trajectory is indicated by the services sector’s impressive success as well as manufacturing’s consistent gains.
In conclusion
Strong domestic and foreign demand, increased productivity, and targeted hiring strategies are all contributing to India’s services sector’s notable renaissance. The sector’s potential to propel economic growth in the upcoming months is shown by the spike in the PMI index, job creation, and international orders. Even though there are still obstacles to overcome, the general picture is positive and India is positioned to play a significant role in the world economy.
