India's services sector expanded at its fastest pace in three months in September 2026, with the HSBC India Services PMI Business Activity Index climbing to 55.2 from 54.1 in August — its strongest reading since June, according to data released on Tuesday, 6 October. The uptick was driven by a sharp acceleration in new orders and resilient domestic demand across a broad range of sub-sectors.

What Drove the Expansion

New business intake rose at the fastest clip in three months, with firms reporting stronger demand for digital solutions, food, insurance, loans, software, transportation, and tours and travel. Among sub-sectors, finance and insurance and consumer services logged the sharpest gains in both activity and sales, according to the HSBC India data.

International demand also improved, with Indian services firms reporting stronger order inflows from Germany, the United Arab Emirates, the United Kingdom, and the United States. Growth in new export business, however, slowed to a moderate pace compared with prior months.

What HSBC's Chief India Economist Said

Pranjul Bhandari, chief India economist at HSBC, said the survey pointed to continued improvement in the sector. 'The PMI survey suggested that India's services sector continued to improve, supported by strengthening domestic demand,' she noted. Bhandari added that 'export business continued to expand, although the pace of growth slowed,' and that easing input-cost pressures had 'reduced the need for service providers to raise selling prices.'

Cost Pressures and Employment

Input cost inflation fell to its weakest level since November 2025, providing relief to service providers. Selling price inflation also eased to its lowest point since June, reducing the incentive to pass on cost increases to customers. On the employment front, hiring continued for a further month, though the rate of job creation moderated from August's pace.

Business confidence strengthened to a three-month high, with firms citing resilient demand conditions and a rise in customer enquiries as key reasons for their optimism about the near-term outlook.

Quarterly Picture and Composite PMI

Despite the monthly improvement, the broader quarterly picture was more cautious. The HSBC India Services PMI averaged lower in the July–September quarter than in the preceding quarter, recording its weakest quarterly performance since the three months to March 2022. This suggests that while the September reading offers a positive signal, momentum for the full quarter lagged earlier in the year.

The HSBC India Composite PMI Output Index — which combines manufacturing and services — climbed to 55.9 in September from 54.3 in August, marking the fastest expansion in overall private-sector output since June. The composite reading signals broad-based strength across the economy heading into the festive season.

With demand conditions improving and cost pressures receding, all eyes will now be on whether October's festive-season tailwinds can push the Services PMI decisively above recent plateaus and narrow the quarterly shortfall.