India’s Services Sector PMI Climbs to 58.7 in April

India’s services sector has kicked off the new financial year on a high note, with the Purchasing Managers’ Index (PMI) rising to 58.7 in April, up from 58.5 in March, according to data released by S&P Global. This growth is attributed to a surge in demand and a significant increase in new orders, following a brief slowdown in March. The report highlights a robust expansion in business activity, driven by favorable market conditions and improved operational efficiencies.

Strong Demand Fuels Business Growth

The services sector experienced a notable increase in new business orders, marking the highest growth in eight months. Companies attributed this surge to supportive market conditions, effective marketing strategies, and enhanced efficiency, which allowed them to manage increased workloads. However, the report also noted a rise in unfinished workloads, exceeding the long-term average. To meet the growing demand, firms accelerated hiring, adding both full-time and part-time positions to enhance their operational capacity. The finance and insurance sectors led this growth, reporting the most significant increases in output and new orders, despite facing the fastest rise in service charges.

Export Orders Surge Amid Global Demand

New export orders for Indian services grew at their fastest rate since July 2024, driven by a spike in international demand from regions including the US, Asia, Europe, and the Middle East. This increase has provided a substantial boost to Indian service providers, enhancing their overall business activity. The report indicates that the rise in export orders has contributed positively to the sector’s performance, reflecting a robust recovery in global markets. As firms adapt to this increased demand, they are also facing challenges related to rising input costs, which have been noted across various sectors.

Input Prices and Inflation Trends

At the beginning of the financial year 2026, input prices saw a moderate increase, the slowest in six months. The report highlighted rising costs in areas such as chemicals, cosmetics, fish, staffing, and transportation, while vegetable prices experienced a decline. In response to these rising costs, services firms have raised their average selling prices to maintain profit margins. The rate of price inflation has been strong, surpassing the pace recorded in March and the long-term average. Consumer services companies have been particularly affected, although there has been a slight easing of cost pressures compared to the previous month.

Mixed Outlook for Future Growth

Despite the positive growth in activity and improved margins, optimism among service providers has dipped to its lowest level in nearly two years. Pranjul Bhandari, chief India economist at HSBC, noted that while services activity has risen at a faster pace, concerns about market competition have tempered confidence in future growth. The private sector also saw a modest improvement, with the composite PMI increasing to 59.7 in April from 59.5 in March, marking the strongest rate of expansion since August 2024. Both goods producers and service providers reported an uptick in new export orders, contributing to the overall rise in business activity. However, the mixed signals regarding future growth highlight the ongoing challenges faced by firms in navigating a competitive market landscape.

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