HSBC Services PMI Expands To 59 In February

Boosted by improving domestic and international demand, new orders placed with Indian services companies rose at a faster rate during February. The uptick in growth underpinned a quicker expansion in output and a substantial increase in employment.

Although firms noted that cost burdens rose further, the rate of inflation receded to a four-month low. Meanwhile, the rate of increase in output prices was broadly similar to January and therefore, remained above its long-run average.

The seasonally adjusted HSBC India Services PMI Business Activity Index rose from January's 26-month low of 56.5 to 59.0 in February, indicating a sharp rate of expansion that was well above its long-run average. The HSBC India Composite Output Index also rose from 57.7 to 58.8 in the same duration, indicating a substantial rate of expansion.

Productivity gains, favourable underlying demand and greater intakes of new business were the key determinants of output growth, anecdotal evidence showed.

Sales increased further in February. Gains in international orders supported this trend, with service providers reporting better demand from clients in Africa, Asia, Europe, the Americas and the Middle East. Overall, external sales expanded at the fastest pace in six months.

In order to accommodate for rising new business and alleviate capacity pressures, Indian services firms continued to pursue recruitment drives. Employment expanded sharply, and at one of the fastest rates seen since data collection began in December 2005. According to panellists, full- and part-time staff were hired.

Although labour was identified as a source of cost pressures — via additional recruitment, higher salaries and overtime payments — monitored companies also signalled greater outlays on food, material and packaging. The overall rate of cost inflation nevertheless receded to a four-month low and was aligned with its historical trend. The rate of charge inflation was broadly similar to January, therefore remaining above its long-run average. Survey members commented that additional cost burdens had been passed on to their customers.

Outstanding business volumes rose at the joint at the fastest rate since last May, matching that seen at the start of 2025. The overall level of positive sentiment slipped to a six-month low, however.