Service sector growth hit 15-year high in August, but inflation intensifies, PMI shows

India’s services sector growth accelerated to a 15-year high in August on robust demand, which also pushed prices higher at the fastest rate in over a decade, a business survey showed on Wednesday (September 3, 2025).

That comes after official data showed the sector grew at a much-higher-than-expected 7.8% rate last quarter. But the Trump administration’s steep 50% tariff on U.S. imports of Indian goods threatens to dampen growth in the coming quarters.

HSBC’s India Services Purchasing Managers’ Index (PMI) , compiled by S&P Global, jumped to 62.9 last month from 60.5 in July, but was much lower than a preliminary reading of 65.6.

Readings above 50.0 indicate growth on a monthly basis, while those below that level point to a contraction.

“India’s services PMI Business Activity Index reached a fifteen-year high last month … on the back of surging new orders,” said Pranjul Bhandari, chief India economist at HSBC.

New business — a key gauge for demand — expanded at the sharpest pace since June 2010. That was supported by strengthening international demand with export orders recording their strongest rise in 14 months.

Robust demand allowed companies to pass on rising costs to customers more aggressively. Output price inflation increased to its highest level since July 2012, while input costs rose at the fastest rate in nine months.

Intensifying price pressures could mean overall inflation, which declined to an eight-year low of 1.55% in July, has reached its trough and may start spiking soon.

Business confidence for the year ahead improved to a three-month high with firms citing planned advertising spending and favourable demand forecasts. However, employment growth remained relatively modest.

The Composite PMI, which combines services and manufacturing sectors, rose to a 17-year high of 63.2 in August from 61.1 in July, indicating broad-based economic momentum across both segments of the economy.