“While India’s service sector continued to perform well in December, the retreat in several survey indicators as 2025 ended may suggest a moderation in growth heading into the new year,” said Pollyanna De Lima, economics associate director at S&P Global Market Intelligence.
Services activity averaged 59.4 in 2025, compared with 60 in 2024. A reading above 50 indicates expansion in activity, while below that shows contraction.
Manufacturing activity in the country also slackened, slowing to a two-year low of 55 in December from 56.6 in the previous month, reflecting weaker new orders and output. Overall, India’s composite Purchasing Managers’ Index, which combines manufacturing and services, fell to a 11-month low of 57.8 in December from 59.7 in November.
Looking ahead, firms are optimistic of a rise in business activity in 2026. However, the overall level of positive sentiment fell for the third month in December to its lowest in around three-and-a-half years owing to concerns about market uncertainty and exchange rate movements.
“What bodes well for the outlook is the benign inflation environment. If services firms continue to see only mild increases in their expenses, they should be better positioned to compete and limit price hikes, thereby boosting sales and creating more jobs,” said De Lima.
Growth in new orders was limited due to alternative and cheaper service providers elsewhere, even as competitive pricing, demand buoyancy and positive client interest supported new work.Export orders strengthened in December, driven by demand from Asia, North America, West Asia and the UK.
“Companies did express some anxiety about market uncertainty and exchange rate movements. While recent rupee weakness may have driven import costs higher, it likely made exports more competitive,” said De Lima.
Service sector jobs fell only marginally in December, with 96% of firms reporting no change from the previous month, largely due to a lack of pressure on operating capacities.
Meanwhile, input costs and output charges saw a modest increase, with firms citing higher expenses from building items, chemicals, medical supplies, salaries, vegetables and office maintenance fees.