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India's Services Growth Hits Six-Month High in May, Final PMI Shows

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India's Services Growth Hits Six-Month High in May, Final PMI Shows

India's services sector expanded at its fastest pace in six months in May, supported by stronger demand and a quicker increase in new business, according to survey data released Wednesday.

The HSBC India Services PMI Business Activity Index rose to 59.8 in May from 58.8 in April, marking the strongest rate of expansion since November 2025, beating the consensus forecast of 58.9.

The increase was driven by healthy demand conditions, new client wins, and continued growth in new business. New orders rose at the fastest pace in six months, moving further away from the slowdown recorded in March.

New export orders also increased, with firms reporting gains from Australia, Canada, France, Germany, Hong Kong, Malaysia, the UAE, and the UK.

"India's services PMI signaled an expansion in business activity in May, supported by a continued rise in new business," Pranjul Bhandari, chief India economist at HSBC, said.

"External demand for India-provided services also grew at a faster pace, rebounding after a sharp decline in April. Input cost inflation eased, which in turn reduced pressure on selling prices."

Input costs continued to rise during the month, driven by higher prices for food, fuel, gas, labor, and materials. However, cost inflation eased to a four-month low, while charge inflation softened to its weakest level since January.

Despite the strong demand environment, business confidence among service providers slipped to a three-month low and remained below the historical average.

The broader private sector also strengthened. The HSBC India Composite PMI Output Index rose to 59.3 in May from 58.2 in April, while new business across the private sector increased at the fastest pace in six months.

The survey comes as India faces growing pressure from higher energy costs linked to the conflict in Iran, which has pushed up fuel import bills and weighed on the rupee.

To cushion the economic impact, authorities have raised fuel prices, curbed gold imports, and tightened foreign-exchange regulations.

Bloomberg reported that the Reserve Bank of India is considering a range of measures to stabilize the currency, including a potential interest-rate increase, additional currency swaps, and efforts to attract more dollar inflows from overseas investors, after the rupee recently fell to a record low against the U.S. dollar.

Markets are now awaiting the Reserve Bank of India's next monetary policy decision on June 5.

Prime Minister Narendra Modi also urged citizens earlier in May to reduce fuel consumption and limit non-essential travel to help conserve foreign-exchange reserves.

The outlook is also clouded by weather risks after India lowered its monsoon forecast to 90% of the long-term average, citing the likely emergence of El Niño.

Reduced rainfall could hurt agricultural output, raising the risk of higher food inflation and stronger demand for fuel and power.

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