India's services sector recorded its strongest expansion in four months in October 2026, supported by rising domestic demand, new customer acquisitions and an increase in business orders. At the same time, easing cost pressures provided some relief to companies, although employment growth and international demand showed signs of moderation.
According to the latest HSBC India Services Purchasing Managers' Index (PMI) survey, released on Wednesday, November 4, the seasonally adjusted Business Activity Index increased to 55.8 in October, compared with 55.2 in September. The reading indicates a faster pace of expansion in the sector and marks its strongest performance since June.
A PMI reading above 50 indicates expansion, while a score below 50 signals contraction.
New Business Orders Drive Services Sector Expansion
Survey participants identified growth in new business as the main contributor to higher output during October. Companies reported favourable demand conditions, the addition of new clients and successful advertising campaigns as factors supporting fresh order intake.
The improvement suggests that domestic demand continued to provide important support to India's services industry, even as businesses remained cautious about the broader economic outlook.
Pranjul Bhandari, Chief India Economist at HSBC, said that overall demand remained fairly strong. However, new export orders recorded their slowest pace of expansion since February 2023, indicating that international demand was not keeping pace with the domestic improvement.
The latest figures therefore point to an uneven recovery across different parts of the services market, with stronger overall activity but weaker momentum in export-related business.
Cost Pressures Ease as Input and Output Prices Rise More Slowly
Another positive development in the October survey was the moderation in cost pressures.
Both input and output prices continued to increase, but at a slower pace than in September. According to Bhandari, this indicated some relief from inflationary pressures faced by service providers.
The moderation could provide businesses with greater flexibility in managing operating expenses, although the continued increase in prices suggests that cost pressures have not disappeared entirely.
The improvement in cost conditions was also visible across manufacturing businesses, contributing to a broader moderation in inflation within India's private sector.
Employment Growth Slows Despite Higher Business Activity
Despite stronger business activity, employment growth in the services sector weakened during October.
The survey indicated that hiring increased at its slowest pace since June, with companies adding employees to the smallest extent in four months. This suggests that some businesses may currently have sufficient staffing capacity to handle existing demand without significantly expanding their workforce.
Business confidence also remained cautious. Although companies continued to express optimism about future activity, their outlook was less upbeat than in the previous month.
The combination of rising orders and slower recruitment indicates that stronger output has not yet translated into equally strong employment expansion.
Composite PMI Reaches Four-Month High
India's broader private-sector activity also improved in October. The HSBC India Composite PMI, which combines comparable manufacturing and services indicators, increased to 56.2 from 55.9 in September.
The reading represented the fastest expansion in combined private-sector output in four months.
New business orders at the composite level also grew at their strongest pace since June. However, employment creation moderated, while businesses expressed less confidence in future growth than they had in September.
The survey also found that easing cost pressures across manufacturing and services helped bring the overall rate of private-sector inflation to an 11-month low.
What the October PMI Data Means for Indian Businesses
The October figures indicate that India's services economy continues to expand, supported by domestic demand and improving business activity. However, slower export-order growth and moderate hiring suggest that the recovery is not equally strong across all areas.
For companies, the combination of higher order volumes and easing cost pressures may create opportunities to improve operating efficiency. Businesses will still need to monitor staffing requirements, pricing decisions and demand conditions as they plan for the coming months.
Effective financial planning, expense monitoring and operational controls can help businesses respond to changing market conditions. Companies seeking support with financial processes can explore Shunyatax's business advisory services.