India’s services sector expanded at its fastest pace in four months in October 2026, with the HSBC India Services Purchasing Managers’ Index (PMI) rising to 55.8 from 55.2 in September. Stronger domestic demand and new business orders supported the improvement, while input-cost inflation eased to its lowest level since August 2020. The reading remained comfortably above the 50-point threshold that separates expansion from contraction.
However, the recovery was uneven. International orders grew at their slowest pace since February 2023, while hiring slowed to a four-month low. The latest data suggests that India’s services businesses are benefiting from stronger domestic demand but remain cautious about overseas demand and workforce expansion. The HSBC India Composite PMI Output Index, which tracks manufacturing and services activity together, also increased to 56.2 from 55.9 in September.
India’s Services PMI Reaches 55.8 in October
The seasonally adjusted HSBC India Services Business Activity Index increased to 55.8 in October, marking its highest reading since June 2026.
The improvement indicates that service providers experienced stronger business activity compared with the previous month. The index has remained above 50, signalling continued expansion in the sector.
Companies participating in the survey attributed stronger activity to favourable demand conditions, new customer acquisitions and successful advertising campaigns.
New business orders also increased at their fastest pace in four months, suggesting that domestic customers continued to spend on services despite broader economic uncertainties.
The improvement was visible across all four broad service-sector segments covered by the survey. However, the pace of growth differed between industries.
Finance and Insurance recorded the strongest expansion in both business activity and new orders, while Real Estate and Business Services reported the slowest growth among the four segments.
Domestic Demand Drives Services Sector Growth
Domestic demand remained the primary growth engine for India’s services industry during October.
Companies reported receiving more orders from customers within India, supported by new client acquisitions and improved market conditions.
The stronger performance suggests that businesses serving domestic consumers and companies continued to experience healthy demand.
However, international demand presented a different picture.
New export orders increased only marginally, recording their weakest expansion in nearly four years. The growth rate was also the slowest since February 2023.
This divergence between domestic and overseas demand is important because India’s services industry includes businesses that depend heavily on international customers.
IT services, business process management, consulting and other professional services companies can be affected by changes in spending decisions across major overseas markets.
Although the October survey does not establish a direct cause for weaker export growth, it indicates that international demand was considerably less supportive than domestic demand.
Input-Cost Inflation Falls to Lowest Level Since August 2020
One of the most positive developments in the October survey was the moderation in input-cost inflation.
Service providers reported that the pace of increase in operating expenses slowed to its lowest level since August 2020.
Businesses continued to face higher expenses related to electricity, labour, raw materials and transportation. However, the overall rate of cost increases was considerably lower than in September.
The moderation also affected the prices charged to customers.
Fewer than 3% of surveyed service providers increased their selling prices during October. Overall selling-price inflation remained marginal and eased to its lowest level since June 2026.
| Services PMI indicator | October 2026 performance |
|---|---|
| Services PMI | 55.8 |
| September Services PMI | 55.2 |
| Business activity growth | Fastest in four months |
| New business growth | Fastest in four months |
| Input-cost inflation | Lowest since August 2020 |
| Selling-price inflation | Lowest since June 2026 |
| Export-order growth | Slowest since February 2023 |
| Employment growth | Four-month low |
The decline in cost pressures could provide some relief to service providers, particularly businesses operating with relatively tight margins.
However, lower inflation does not mean that input prices are falling. It means that costs are increasing at a slower pace.
Hiring Growth Slows Despite Stronger Business Activity
Despite stronger demand and rising business activity, employment growth across India’s services sector weakened in October.
The pace of job creation fell to a four-month low and was the joint-weakest during the current 10-month period of employment growth.
Overall hiring remained marginal.
One reason behind the slowdown appears to be that businesses have sufficient staffing capacity to manage their current workloads.
The survey also showed that outstanding business volumes declined for the third time in four months. The reduction was moderate, suggesting that companies were able to process existing work without significantly expanding their workforce.
For India’s employment market, this presents a mixed picture.
Stronger business activity generally supports hiring, but the latest data indicates that service providers are not increasing employee numbers at the same pace as their business expands.
Business Confidence Weakens in October
Companies remained optimistic about their business prospects over the next 12 months, but confidence declined compared with September.
The level of positive sentiment remained below its long-run average, indicating that businesses were becoming more cautious about future growth.
Several factors may influence this outlook, including weaker international demand, uncertainty in overseas markets and the pace at which companies can convert new orders into sustained revenue.
Although domestic demand remains strong, businesses are not yet fully confident that the current momentum will continue at the same pace.
India’s Composite PMI Rises to 56.2
Alongside the improvement in services, India’s overall private-sector activity also strengthened in October.
The HSBC India Composite PMI Output Index increased to 56.2 from 55.9 in September, indicating the fastest expansion in four months.
The composite index measures business activity across both manufacturing and services.
| PMI indicator | September 2026 | October 2026 |
|---|---|---|
| Services PMI | 55.2 | 55.8 |
| Composite PMI Output Index | 55.9 | 56.2 |
The improvement in the composite reading was supported by stronger services activity, while manufacturing output growth moderated but continued to expand faster than services output.
New business orders across the private sector also increased at their fastest pace since June.
However, employment growth softened across the broader private sector, while business confidence weakened compared with September.
Inflationary pressures also eased. The aggregate rate of input-cost inflation fell to an 11-month low, while selling-price inflation moderated to its lowest level since February 2022.
These figures suggest that India’s private sector entered the final quarter of 2026 with stronger business activity and relatively lower cost pressures.
What the October PMI Data Means for India’s Economy
The latest services PMI reading provides a positive signal for India’s economic activity.
Services account for a major share of India’s gross domestic product and include industries such as financial services, information technology, telecommunications, transport, hospitality, professional services and real estate.
Stronger activity across these businesses can support economic growth through higher sales, investment and demand for related services.
The improvement in domestic orders is particularly encouraging because it indicates that Indian customers and businesses continue to generate demand.
However, weaker export growth and slower hiring remain areas to watch.
If international demand remains subdued, service providers that depend on overseas customers could face pressure on their growth prospects. Similarly, slower employment expansion could limit how much stronger business activity translates into additional job opportunities.
The moderation in input costs is another positive development, although businesses will need to see whether the trend continues in the coming months.
The Bigger Picture
India’s October services PMI highlights the strength of domestic demand in supporting economic activity even as international demand loses momentum. The improvement in business activity, combined with lower input-cost inflation, provides a favourable operating environment for many service providers.
However, the slowdown in hiring and export orders shows that the recovery is not uniform. India’s services sector is expanding, but companies remain cautious about adding employees and their expectations for future business conditions. The sustainability of domestic demand and a recovery in international orders will be important factors in determining the sector’s performance in the coming months.
Looking Ahead
The next PMI readings will help determine whether October’s improvement represents the beginning of a stronger growth trend or a temporary recovery. Businesses will be watching domestic order volumes, international demand, operating costs and hiring activity as they plan for the remainder of the financial year.
For India’s economy, the combination of stronger services activity and easing inflationary pressures is encouraging. However, the slowdown in export orders and employment growth suggests that policymakers and businesses will need to monitor the quality of the recovery rather than relying only on the headline PMI number.
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