India's services sector expansion moderated to its weakest pace in 17 months during June, as domestic demand softened and hiring activity nearly stalled, according to the latest HSBC India Services PMI survey released on Friday, July 3.
The seasonally adjusted HSBC India Services PMI Business Activity Index fell to 57.4 in June, down sharply from 59.8 in May. Although the index remained above the neutral 50-mark, indicating continued growth, the pace of expansion decelerated meaningfully, according to the survey compiled by S&P Global.
Weaker Domestic Demand and Subdued Hiring
The slowdown was driven by the weakest increase in new orders in more than two-and-a-half years, highlighting softer domestic demand. Several firms cited challenging market conditions and reduced client interest for certain services, which weighed on sales and output during the month.
Hiring activity also nearly stalled, with only around 1 per cent of surveyed firms reporting additional recruitment in June, following stronger hiring in April and May. Business confidence fell to a five-month low as companies cited difficult economic conditions, rising competition and concerns over rupee depreciation, according to Reuters.
"India's services PMI remained in expansionary territory but eased to 57.4 in June, the lowest reading in 17 months. The loss of momentum points to more challenging market conditions and weaker demand, particularly at home," said Pranjul Bhandari, chief India economist at HSBC.
Export Demand Remains a Bright Spot
Despite the domestic softness, overseas business continued to support the sector. Companies reported the strongest rise in export orders in three months, driven by improved demand from clients in Australia, Belgium, Canada, Germany, Malaysia, Nepal, Oman, Qatar, Singapore, the UAE and the US.
"... External demand held up well as overseas sales stayed robust and growth reached a three-month high," Bhandari said, as quoted by news agency PTI.
| Metric | June 2026 | May 2026 | Change |
|---|---|---|---|
| HSBC India Services PMI | 57.4 | 59.8 | -2.4 |
| New orders growth | Weakest in 2.5+ years | Stronger | Decline |
| Hiring (firms adding staff) | ~1% | Higher | Sharp drop |
| Business confidence | 5-month low | Higher | Decline |
| Export orders growth | 3-month high | Lower | Improvement |
Price Pressures Ease
Input cost inflation slowed to its weakest level since November 2025, while output price inflation moderated as geopolitical disruptions in the Middle East began to ease. "Price pressures also continued to cool, with both input cost and output charge inflation moderating as geopolitical disruptions in the Middle East began to subside," Bhandari added.
Composite PMI Also Weakens
The broader HSBC India Composite PMI Output Index, which combines manufacturing and services activity, slipped to 57.1 in June from 59.3 in May, indicating slower growth across the private sector. Aggregate sales expanded at the weakest pace in three months, employment growth softened to its slowest level of 2026 so far, while external orders grew at their weakest pace in nearly two years.
"Reflecting the broader slowdown, India's composite PMI fell slightly to 57.1 in June from 59.3 in May, alongside softer sales volumes, slower job creation and more subdued pricing," Bhandari said.
The HSBC India Services PMI is compiled by S&P Global based on responses from around 400 service-sector companies.
For executives and investors, the data signals a moderation in India's economic momentum, particularly in the dominant services sector. While the export side offers some cushion, the weakening domestic demand and hiring pause warrant close monitoring. The next milestone will be the release of June trade and industrial production data due later this month, which will provide further clarity on the economy's trajectory.
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