India’s services sector, a major driver of economic growth, continued to expand in September, albeit at a slower pace compared to the previous month. The HSBC India Services Purchasing Managers’ Index (PMI) declined to 60.9, signaling sustained growth but indicating moderation from August’s 62.9. Economists suggest that while the slowdown is temporary, it highlights emerging challenges in international demand and supply-side constraints.
The services sector, which contributes nearly 55% to India’s GDP, encompasses industries ranging from IT and financial services to transportation, hospitality, and logistics. September’s data revealed that domestic demand remained strong, fueled by consumer spending, infrastructure projects, and festive season preparations. New business orders from within India supported expansion, offsetting weaker export inflows.
However, companies reported a decline in export orders, particularly from the U.S. and Europe, due to global economic uncertainty and fluctuating currency exchange rates. The ongoing U.S. government shutdown and elevated inflation in key Western economies have contributed to cautious spending by corporate clients abroad. This decline in international demand has slightly tempered overall business confidence in the sector.
Employment in services, traditionally a major generator of jobs for youth, remained resilient. Firms continued to hire, although at a slower pace than earlier months, reflecting the sector’s cautious approach toward workforce expansion. Input costs, particularly for energy and logistics, have risen moderately, prompting companies to optimize operations and maintain efficiency.
Industry analysts highlight that the IT services, finance, and digital consulting segments continue to perform strongly, supported by sustained demand for digital transformation, cloud services, and technology solutions. Conversely, travel, tourism, and hospitality segments have experienced fluctuating demand due to seasonal and international market trends.
“India’s services sector remains robust, but the current moderation is a signal that companies need to diversify their export base and strengthen domestic market linkages,” said Radhika Sharma, chief economist at Kotak Economics. “Policymakers must also focus on infrastructure and regulatory support to sustain long-term growth momentum.”
The government has introduced several initiatives to further support services growth, including PLI schemes for IT hardware, digital payments incentives, and trade facilitation measures for SMEs. These policies aim to enhance India’s global competitiveness while creating employment opportunities domestically.
Looking ahead, the sector is expected to rebound in the coming months, particularly as festival-driven consumer spending, corporate project rollouts, and government-backed infrastructure investments pick up pace. Analysts emphasize that India’s long-term service sector outlook remains positive, driven by a young workforce, digital adoption, and an expanding domestic market.
In conclusion, while September’s data reflects a modest slowdown, India’s services sector continues to be a cornerstone of economic growth, offering resilience against global headwinds and remaining a vital engine of employment, innovation, and productivity.