Demand buoyancy, new business gains and technology investments underpinned the increase in activity.
The HSBC India Services Business Activity Index increased to 58.5 in January from 58 in December, compared with 56.6 a year earlier. A reading above 50 indicates expansion in activity, while below that shows contraction.
The reading signals “sustained momentum in the sector”, said Pranjul Bhandari, India chief economist at HSBC. “Robust output growth was driven by a steady influx of new orders, including increased international demand from South and Southeast Asia,” she added.
Manufacturing activity also edged higher, with the PMI rising to 55.4 in January from 55 in December, supported by growth in output and new orders. Overall, India’s composite PMI, which combines manufacturing and services, rose to 58.4 in January from an 11-month low of 57.8 in December. “The composite PMI strengthened in January, reflecting solid demand growth across both manufacturing and services,” Bhandari said. Looking ahead, service providers remain optimistic, with business confidence rising to a three-month high. Firms cited efficiency gains, marketing initiatives and new client acquisitions as key drivers of improved sentiment. The services sector also reported an increase in new orders, helped by stronger client interest and an enhanced online presence that boosted sales.
Segment-wise data showed that finance and insurance led growth in both output and new orders, despite being the only category to have slowed since last December. While domestic demand remained the primary source of new business, international orders also increased at a brisk pace, marking the fastest expansion in three months. Survey respondents cited gains from clients in Indonesia, Kenya, Malaysia, Oman, Qatar, Sri Lanka, Thailand and Vietnam.
The increase in orders led service providers to resume hiring in January. “The pace of job creation was only marginal, however, as the vast majority of firms opted to leave workforce numbers unchanged amid sufficient resources for current requirements,” the survey said. On the cost side, input prices surged at the fastest pace since last September, though increases remained moderate and below the long-term average.
Firms reported higher costs for items such as eggs, electronic goods, meat, paper and vegetables.
Output charges also increased, with inflation reaching a three-month high. “While input and output prices are rising, they remain fairly mild by historical standards,” Bhandari said. The survey mentioned that service providers continued efforts to balance higher cost with profitability.