India Services PMI Rises to 55.2 in September Amid Demand Recovery

India’s services sector regained some momentum in September as stronger domestic demand and a rise in new business pushed activity to its fastest pace in three months. The HSBC India Services Purchasing Managers’ Index (PMI) rose to 55.2 in September from 54.1 in August, signalling a renewed improvement in business activity across the country’s dominant services economy.

The September improvement, however, does not mean the sector has returned to the stronger growth rates seen earlier in the year. The July–September quarter recorded the weakest average services-sector growth since the quarter ended March 2022, while softer export growth and slower hiring continued to weigh on the broader picture. The data therefore point to a monthly recovery rather than a decisive acceleration in the underlying trend.

Key takeaways

• India’s Services PMI increased to 55.2 in September from 54.1 in August.
• September marked the strongest services-sector expansion in three months.
• New business growth accelerated to its fastest pace since June.
• Domestic demand remained the main support for growth.
• Growth in new export business slowed to its weakest pace in nearly three years.
• Services employment continued to rise, but hiring growth moderated from August.
• Input-cost inflation fell to a 10-month low.
• Services companies raised prices at a slower pace.
• The Composite PMI increased to 55.9 from 54.3, indicating stronger private-sector activity.
• Despite September’s improvement, the July–September quarter was the weakest for services growth since early 2022.

Services Activity Recovers in September

The HSBC India Services PMI Business Activity Index increased to 55.2 in September from 54.1 in August. Any PMI reading above 50 indicates an expansion in activity, while a reading below 50 indicates contraction.

The September reading therefore shows that Indian service providers continued to expand, with the pace of activity improving from the previous month.

The increase also represented a three-month high. That is important because services activity had been losing momentum during the preceding months, making September’s improvement an indication that demand conditions had begun to stabilise.

However, the final reading was weaker than the preliminary estimate of 55.8. This means the improvement was not as strong as the initial flash PMI had suggested.

The distinction matters because PMI data are closely watched as an early indicator of economic activity. A stronger preliminary reading can signal a more powerful recovery, while a downward revision suggests that the underlying improvement was somewhat more moderate.

Domestic Demand Becomes the Main Growth Engine

The strongest part of the September survey was the improvement in domestic demand.

New business, an important indicator of demand conditions for service companies, increased at its fastest pace since June. Companies reported stronger demand across several parts of the economy, including financial services, consumer services and digital-related activities.

The improvement was also visible across businesses connected to software, transportation, food, insurance, loans, tourism and travel.

This suggests that the September recovery was largely supported by Indian customers rather than by a major improvement in international demand.

For India’s services economy, that distinction is significant. Domestic consumption and business spending can provide a relatively stable source of growth, while export-oriented service companies are more exposed to conditions in major overseas markets.

The September data indicate that domestic customers were providing a firmer foundation for activity even as external demand became less supportive.

Export Growth Loses Momentum

International demand for Indian services continued to increase in September, but the pace of expansion weakened.

Growth in new export business slowed to its weakest level in nearly three years. Companies continued to report business from important markets including Germany, the United Arab Emirates, the United Kingdom and the United States, but the overall rate of new export growth moderated.

This creates an important contrast within the PMI report.

On one side, Indian service companies were receiving more domestic orders and experiencing stronger new-business growth. On the other, international orders were becoming less dynamic.

That divergence could become increasingly important for India because services exports are a major component of the country’s external earnings. Information technology, business services, financial services and other internationally traded activities depend heavily on overseas demand.

A sustained slowdown in export orders could therefore limit the ability of the services sector to maintain faster growth even if domestic demand remains resilient.

Hiring Continues, But at a Slower Pace

Employment in the services sector continued to increase in September, supported by stronger order books and business activity.

However, the rate of job creation slowed compared with August.

The moderation was particularly visible in parts of the real estate and business-services industries. That suggests companies remained willing to expand their workforce but were becoming somewhat more cautious about hiring.

Employment trends are particularly important when interpreting the PMI because stronger business activity does not automatically translate into equivalent job creation.

Companies may respond to stronger demand first by using existing capacity more intensively, improving productivity or extending working hours before committing to substantial new hiring.

The September figures appear to reflect some of that caution.

The broader private sector nevertheless benefited from an improvement in employment conditions because manufacturing employment also returned to growth during the month.

Input-Cost Inflation Falls to a 10-Month Low

One of the more favourable developments in the September PMI was the decline in input-cost inflation.

The rate at which service providers’ input costs increased fell to its lowest level in 10 months. The moderation was broad-based across the services categories covered by the survey.

Lower cost pressures can provide companies with greater flexibility.

Businesses facing slower increases in wages, technology expenses, fuel, maintenance, insurance and other operating costs may be less compelled to increase prices charged to customers. That can help preserve demand and margins, particularly in competitive service industries.

The September survey showed that selling-price inflation also eased. Prices charged by service providers increased at a slower rate than in the previous month, with the rate of inflation reaching its lowest level since June.

This combination of stronger demand and softer cost pressures is generally favourable for businesses.

It potentially gives companies room to increase activity without facing the same degree of margin pressure that would arise if input costs were accelerating rapidly.

Business Confidence Improves, But Remains Subdued

Service companies became somewhat more optimistic about future activity in September.

Business confidence reached a three-month high, supported by resilient demand and increasing customer enquiries.

However, confidence remained subdued by historical standards.

Only around 16% of surveyed firms expected their output to increase over the next 12 months. That is a relatively limited proportion and highlights the cautious outlook among businesses despite the improvement in current activity.

This is another reason why September’s PMI should not be interpreted as evidence of an aggressive new growth cycle.

Companies are reporting better current demand, but expectations about future expansion remain restrained. The combination suggests that businesses may be waiting for more evidence that the recovery can persist before making major investments or expanding capacity.

Composite PMI Rises to 55.9

The improvement in services was accompanied by a stronger performance in manufacturing.

The HSBC India Composite PMI Output Index, which combines manufacturing and services activity, increased to 55.9 in September from 54.3 in August.

The reading indicated the fastest expansion in India’s private-sector output since June.

Manufacturing activity also accelerated during September, while manufacturing employment returned to growth. The combination of improving factory activity and stronger services activity helped lift the overall private-sector PMI.

This provides a broader picture of the Indian economy than the services PMI alone.

Rather than the September improvement being restricted to one part of the private sector, both manufacturing and services contributed to the acceleration in overall business activity.

However, the quarterly picture remained considerably weaker.

Q2 FY27 Growth Tells a More Cautious Story

September’s stronger monthly reading needs to be viewed alongside the performance of the entire July–September quarter.

Despite the September rebound, average services growth during the second fiscal quarter was the weakest since the three months ended March 2022.

The same broad pattern was visible in the composite PMI.

The composite index rose sharply in September, but its quarterly average also remained subdued compared with previous periods.

This creates a two-speed picture of the Indian economy.

The first signal is encouraging: September showed stronger domestic demand, faster new-business growth and improved overall private-sector activity.

The second signal is more cautious: the recovery came after a weaker quarter, while exports, hiring and business confidence were not showing equally strong momentum.

For policymakers and businesses, the key question is therefore whether September represents the beginning of a sustained improvement or simply a temporary rebound after weaker activity.

What the PMI Means for India’s Economy

PMI data are not the same as official GDP statistics, but they provide a timely indication of changes in business conditions.

The September figures suggest that India’s domestic economy continued to generate demand even while external conditions remained less supportive.

That is particularly relevant for a services-heavy economy.

India’s financial services, consumer services, digital economy, software, transportation and business-services industries have become increasingly important sources of economic activity. Stronger domestic orders across these areas can support corporate revenue, employment and investment.

At the same time, weaker export momentum highlights the exposure of India’s services sector to global demand.

If major international markets slow, Indian companies dependent on overseas contracts could face weaker order books even while domestic businesses continue to perform relatively well.

The September PMI therefore supports the argument that domestic demand remains one of the main pillars of India’s growth story.

Lower Cost Pressures Could Help Service Companies

The easing of input-cost inflation provides another positive signal.

Service companies experienced their weakest input-cost inflation in 10 months, reducing the pressure to raise customer charges.

This could have several effects.

First, companies may be able to protect profit margins if operating costs rise more slowly than revenue.

Second, businesses may have more flexibility to compete on pricing.

Third, lower price increases can help maintain customer demand, particularly in price-sensitive consumer services.

However, the benefit will depend on how long the moderation in costs lasts.

Energy prices, wages, technology expenses, insurance costs and other business inputs can change quickly. A temporary decline in cost inflation would not necessarily translate into a lasting improvement in margins.

What Businesses and Investors Should Watch Next

The next few PMI releases will be important because September alone cannot establish a durable trend.

The first indicator to watch is new business growth. If domestic orders continue to accelerate, it would suggest that the September improvement is becoming more firmly established.

The second is export demand. A continued slowdown in new export orders could become a constraint on service-sector growth, especially for internationally oriented companies.

The third is employment. If companies begin hiring more aggressively, it would indicate greater confidence in the durability of demand. Conversely, continued moderation in hiring could suggest that businesses remain cautious.

Input costs will also remain important. The combination of stronger demand and lower cost inflation was favourable in September, but whether that combination persists will influence corporate margins and consumer prices.

Finally, business confidence needs to improve further. The fact that only around 16% of firms expected output to increase over the next year indicates that companies have not yet fully embraced the prospect of a stronger expansion.

The Bigger Picture

India’s September services PMI presents a mixed but broadly constructive picture of the economy.

The headline number improved to 55.2, new business growth accelerated and domestic demand strengthened. The composite PMI also climbed to 55.9, while input-cost inflation eased to a 10-month low.

Yet the quarterly numbers prevent the September rebound from being described as a broad-based boom.

The July–September quarter was the weakest for services-sector growth since early 2022, export-order growth slowed to a nearly three-year low and employment growth moderated.

In other words, India’s services economy is still expanding, but the pace and composition of that expansion matter.

The most encouraging element is the strength of domestic demand. The biggest concern is whether that demand can remain strong enough to offset weaker international orders and cautious corporate hiring.

For India’s wider economy, September therefore looks more like a stabilisation point than a definitive turning point.

FAQs

What was India’s Services PMI in September 2026?

India’s HSBC Services PMI rose to 55.2 in September 2026, compared with 54.1 in August. The reading indicated continued expansion and represented a three-month high.

What does a PMI above 50 mean?

A PMI reading above 50 indicates that business activity is expanding compared with the previous month. A reading below 50 indicates contraction.

Why did India’s services PMI improve in September?

The improvement was mainly driven by stronger domestic demand and faster growth in new business. Financial, consumer and digital services were among the areas reporting stronger activity.

Was the September PMI completely positive?

No. Although monthly activity improved, the July–September quarter recorded the weakest average services-sector growth since early 2022. Export growth and employment growth also moderated.

Looking Ahead

The September PMI gives India a positive short-term signal, particularly because domestic demand strengthened while input-cost inflation eased. If new orders continue to rise in the coming months, the services sector could enter the final part of 2026 with stronger momentum.

The bigger test will be whether the improvement extends beyond one month. Sustained domestic demand, a recovery in export orders, stronger hiring and continued moderation in input costs would provide evidence of a durable recovery. Until then, the September reading should be viewed as an encouraging improvement against a comparatively weak quarterly backdrop.