India services output growth slows to 9.8% in May as retail-linked activity cools
Estimated output across 19 services sectors grew 9.8% year on year in May, down from 20.8% in April. Retail trade, road transport, IT and support services softened, while accommodation and food services remained the fastest-growing segment.
What happened
India’s services output growth slowed in May, partly due to weaker retail trade, road transport, IT and support services. Accommodation and food remained the fastest-growing category, while economists said broader services momentum should remain resilient through Q1 2026-27.
Key facts
- Estimated ISP growth across 19 services sectors: 9.8% in May, versus 20.8% in April
- Accommodation and food services output: 27.4% growth in May versus 37.2% in April
- IT and computer-related services: 10.3% growth in May versus 15.2% in April
- Rail transport: 3.4% growth in May versus -0.4% in April
- Air transport: -2.8% in May versus -13.9% in April
- Eight of 19 sectors recorded double-digit year-on-year growth in May, versus 14 in April
- Covered sectors account for about 60% of formal services
- Eight key services grew 10.3% on average in May 2026
- IIP averaged 5.7% growth in Q1 2026-27
- ISP averaged 15.3% growth in the first two months of Q1 2026-27
Why this matters
Use the slowdown to pursue value-accretive partnerships or acquisitions in resilient food and accommodation assets while avoiding cyclically exposed retail-service targets.
What to watch
- June and July retail trade, road transport and accommodation-and-food-services output readings
- High-frequency mall footfall, UPI/POS transaction volumes, e-commerce order growth and restaurant bookings
- Monsoon progress, food inflation and rural wage/income indicators
- Consumer confidence, urban employment trends and household credit growth
- Festive-season inventory ordering, discount depth and retailer guidance from July onward
- Shift near-term sales plans from traffic-led growth to conversion, basket size and repeat-customer growth.
- Protect inventory turns by tightening replenishment for discretionary categories while maintaining availability in essentials, food and travel-linked demand.
- Increase localized promotions and loyalty offers rather than broad discounting, especially in weaker urban catchments.
- Monitor tenant sales and lease negotiations closely; slower footfall could strengthen retailer bargaining power in secondary malls and high streets.
- Prioritize expansion formats tied to resilient accommodation, food service, transit hubs and value-oriented consumption.