India's services sector reached a three-month peak in May due to robust export growth; employment saw a record increase.

India's services sector output achieved a three-month peak in May, fueled by robust export growth. The seasonally adjusted HSBC India Services PMI Business Activity Index, created by S&P Global, rose to 58.8 in May from 58.7 in April and 58.5 in March, remaining significantly above the threshold of 50 that signifies expansion. Employment surged to a record level as businesses increased operations to align with the sustained sales growth. Price metrics indicated a rise in inflation for both input costs and output charges, with both surpassing their historical averages. The services sector in India, a cornerstone of the nation's economy, makes up more than half of the country's gross domestic product. India's GDP grew by 6.5% in FY25, supported by a 7.4% increase in the January-March quarter. The economy saw a growth of 9.2% in FY24, propelled by a 7.8% rise in the January-March quarter, exceeding the Reserve Bank of India's 7% projection. The RBI anticipates a GDP growth of 6.5% in FY26, driven by rural demand, government investment, and strong services exports. On the other hand, activity in India's manufacturing sector declined to a three-month low in May as new orders and output growth slowed. The HSBC India Manufacturing Purchasing Managers' Index (PMI), also compiled by S&P Global, decreased to 57.6 in May from 58.2 in April and 58.1 in March. The HSBC India Composite PMI Output Index registered at 59.3 in May, slipping slightly from 59.7 in April, indicating that overall activity continued to expand sharply. The decline in the headline index was reflective of weaker growth in factory production, as services activity accelerated at a faster rate.