India’s services sector continued its strong expansion in May 2025, as firms reported a solid inflow of new business, improved client activity, and a record surge in hiring. According to the HSBC India Services PMI released by S&P Global, the index rose slightly to 58.8 in May, up from 58.7 in April, remaining well above the 50-mark that indicates growth.
The consistent performance reflects the resilience of India’s economy and the crucial role services play in driving post-pandemic recovery. Businesses across IT, finance, hospitality, and real estate noted steady momentum as both domestic and international demand remained strong.
A major highlight of May’s data was the historic rise in employment. Around 16% of firms surveyed reported job creation, marking the sharpest increase in hiring since the survey began in 2005. This hiring boom stems from sustained order growth and business optimism, with many companies expanding their teams to keep up with growing client needs.
While business conditions improved, service providers also reported a rise in operational costs. Inputs such as cooking oil, transport, and overtime wages pushed overall input price inflation to its highest level in four months. As a result, many firms passed some of these costs on to clients, leading to higher output prices.
Despite inflation concerns, business sentiment improved compared to April. Companies expressed confidence in demand sustainability and shared plans to expand their capacity, digital infrastructure, and service offerings over the next year.
India’s private sector as a whole is showing resilience, with both manufacturing and services contributing to a strong composite output. However, it is the services segment that continues to drive the bulk of growth, particularly in urban India.
The Reserve Bank of India, which has already cut interest rates twice in 2025, will closely monitor this data. While economic expansion is a positive sign, continued inflation may influence the RBI’s decision in its upcoming policy review. Analysts predict that the central bank may take a cautious approach and wait to assess inflation trends before considering further rate adjustments.
India’s services sector accounts for more than half of the country’s gross value added and employs a significant share of the urban workforce. As digital transformation, global outsourcing, and business process expansion continue, the sector is expected to remain a key engine of economic momentum through the rest of the year.
FAQs
What is the significance of the 58.8 Services PMI in May 2025?
A reading of 58.8 shows strong expansion in the services economy, with business activity rising for the 47th consecutive month.
Why did India see a record rise in hiring in May?
Strong new business growth and increased client demand led many service firms to expand their workforce, resulting in the highest job creation since 2005.
What are the major challenges for the services sector now?
Rising input costs and inflationary pressures are a concern. Many firms are adjusting pricing, and monetary policy will play a key role in managing this.
How will this data influence the RBI?
The RBI may delay further rate cuts until inflation stabilizes, even though growth remains healthy.
Which industries are leading the services growth?
IT services, financial services, travel, consulting, and real estate are among the top-performing sectors in May 2025.
