India’s services sector showed a notable recovery in April, bouncing back from a slowdown in March, according to a recent private survey. The seasonally adjusted HSBC India Services PMI climbed to 58.7 in April, up from 58.5 in March, reflecting a robust performance above the crucial 50-mark that indicates sector expansion. However, this figure remains slightly below February’s impressive 59.

Services Sector Growth in April

The uptick in India’s services sector was primarily driven by a surge in new business and an increase in overall output. The data indicates:

• New orders gained momentum, leading to a rise in employment opportunities.
• There was a notable increase in unfinished business, signaling capacity pressures.
• Average service charges rose at a quicker rate, despite a decrease in cost pressures, which reached a six-month low.

Pranjul Bhandari, the chief India economist at HSBC, remarked, “The growth in services activity showed a stronger pace than the previous month. New export orders rebounded significantly after a brief slowdown in March, marking the fastest growth since July 2024.” She also noted that while firms are optimistic about future growth, there’s been a slight dip in their confidence levels.

Economic Performance Overview

India’s services sector plays a vital role in the economy, contributing over half of the country’s Gross Domestic Product (GDP). For the fiscal year 2023-24, India’s economy expanded by 8.2%, with a strong 7.8% growth in the January-March quarter, surpassing the Reserve Bank of India’s (RBI) forecast of 7%.

However, signs of slowing growth emerged in 2024-25, with the first quarter witnessing a decline to 6.7%, followed by a further dip to 5.4% in the second quarter—marking the slowest growth rate in nearly two years. This deceleration is attributed to sluggish manufacturing output, subdued urban consumption, and disappointing corporate earnings.

Despite these challenges, India’s growth momentum picked up in the December quarter (Q3FY25), recording a 6.2% increase—this figure is the slowest since Q4FY23, excluding a revised 5.6% from the previous quarter. The RBI anticipates a 6.5% growth rate for FY26, driven by rural demand, increased public investment, and strong services exports.

Manufacturing Sector Insights

Interestingly, India’s manufacturing sector also showed encouraging signs in April, marking its fastest growth in 10 months. The HSBC India Manufacturing PMI rose to 58.2, up from 58.1 in March and 56.3 in February, reflecting strong demand and rising production levels.

Moreover, the HSBC India Composite Output Index reached 59.7 in April, an increase from 59.5 in March and 58.8 in February, indicating the fastest expansion since August 2024.

• New business volumes across the private sector surged, driven by growth in the service economy.
• Both manufacturing and services sectors reported faster expansion in new export orders, achieving a nine-month growth high at the composite level.

This positive trend in both services and manufacturing sectors signals a resilient economic landscape, despite the challenges posed by slower growth rates in recent months.

In conclusion, while April brought a rebound for the services sector, ongoing economic monitoring will be crucial as India navigates its path forward.