India’s Services Sector Momentum Moderates in January; PMI at 58.5 Signals Continued Resilience

Market snapshot: The Indian services sector, a dominant engine of the national economy, experienced a slight moderation in growth momentum at the start of 2026. The HSBC India Services Purchasing Managers' Index (PMI) print for January came in at 58.5, declining from the 59.3 recorded in December 2025. Despite this marginal cooling, the index remains significantly above the 50.0 threshold that separates expansion from contraction, marking approximately 54 consecutive months of growth. The data suggests that while the pace of business activity and new order inflows has eased slightly from year-end peaks, the underlying demand remains robust across the domestic market.

Summary: India's Services PMI moderated to 58.5 in January from 59.3, indicating a deceleration in growth speed while maintaining a strong expansionary trend. Market attention now shifts to the upcoming RBI Monetary Policy Committee meeting.

Key Takeaways

• January Services PMI recorded at 58.5, down from 59.3 in December, indicating a slight softening in business activity expansion.
• The sector has now remained in the expansion zone (above 50.0) for over four years, underscoring structural strength.
• Input cost pressures are reportedly increasing, though firms are attempting to manage margins through operational efficiencies and moderate price hikes.

SAHI Perspective

From a strategic standpoint, the 58.5 print should not be viewed as a sign of distress but rather as a healthy normalization of the 'overheated' growth levels seen during the Q3 festive surge. The services sector currently contributes roughly 54% of India's GDP, and a sustained reading above 58.0 indicates that the sector is still growing well above its long-term average. SAHI analysis suggests that the cooling may actually provide the Reserve Bank of India (RBI) some room to maintain its neutral stance in the February 6 meeting, as the slight deceleration in activity could naturally temper demand-side inflationary pressures. However, the rise in input costs remains a critical variable for service-oriented firms, particularly in the tech and professional services segments where wage costs are sensitive.

Closing Insight

While the headline PMI number saw a sequential dip, the broader macro-economic story for India remains one of 'high-altitude consolidation.' The services sector continues to lead the growth charge, providing a solid foundation for the FY27 GDP targets.

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