India's service sector gained significant momentum in July 2025, with the PMI index reaching 60.5, the highest level in the past 11 months. This growth was driven by new orders, international demand, and increased production. The finance and insurance sector performed best, while real estate experienced slower growth.
The Indian service sector has recorded its fastest growth in 11 months. According to a report by S&P Global and HSBC, the service sector PMI for this month was 60.5, slightly higher than June's 60.4. This growth was attributed to new orders, orders from international markets, and an increase in production. Specifically, the finance and insurance sector saw rapid growth, while real estate and business services experienced a slowdown.
Slight Increase in July Compared to June
In June 2025, the service sector PMI was 60.4, which slightly increased to 60.5 in July. Although this increase may seem marginal, the underlying momentum is quite b. This is the fourth consecutive month that the PMI index has remained above 60 and well above the neutral level of 50. This indicates that business activities in the service sector are continuously increasing.
Advertising and New Customers Key to Growth
According to the HSBC India Services PMI survey, several key factors contributed to this growth. The most significant reason was a substantial increase in new orders. Companies surveyed reported that they achieved good results from advertising and brand promotion. Additionally, the expansion of business was driven by the addition of new customers.
Second Largest Increase of the Year
This increase in July is considered the second largest growth in a year. Similar momentum was previously seen in August 2024. According to the report, demand is continuously improving, and companies' expectations for the future have also increased.
The service sector has received tremendous support not only from within the country but also from international markets. The survey indicated that there has been an increase in orders from foreign markets, particularly from Asia, Canada, Europe, the United Arab Emirates, and the United States. The pace of foreign orders is considered the second largest increase of the year.
Finance and Insurance Sector Leads
Among all service sectors, the finance and insurance sector has performed the best. They have benefited the most from new orders and activities. On the other hand, the growth of the real estate and business services sectors has been slower. There has not been the expected increase in new orders and demand in these sectors.
Increase in Input and Output Prices
In July, not only did business increase, but there was also a slight increase in both cost and sales prices. Companies reported that there has been an increase in the prices of inputs (raw materials and resources), which has also affected the output prices (prices of their services). This increase was slightly higher compared to June.
HSBC's Chief Economist Pranjul Bhandari stated that these service PMI figures indicate b growth. New export orders, in particular, have played a significant role in the sector's growth. She also mentioned that companies have growing expectations for the future, although they are still slightly below the levels of the first half of fiscal year 2025.
Impact of CPI and WPI Data
Some uncertainty remains regarding future prices. According to Pranjul Bhandari, the recently released Consumer Price Index (CPI) and Wholesale Price Index (WPI) data suggest that some changes in input and output prices may be seen in the coming months. This could potentially impact inflation.
Increased Confidence of Companies
Companies participating in the survey say that they now have more confidence in their business. They are planning to expand production and services due to new customers, increasing demand, and improved international orders. The level of business confidence was also higher in July than before.
Amidst this increasing activity, there is also a possibility that employment opportunities in the service sector may increase in the coming months. As companies move towards more orders and production, they also need more employees. Some companies have mentioned increasing the number of employees in July.
