Growth in India’s services sector decelerated markedly in July, slipping to its weakest pace in over four years, according to a private-sector survey. HSBC’s India Services Purchasing Managers' Index (PMI), compiled by S&P Global, dropped to 53.3 in July from 57.4 in June, finishing slightly above a preliminary reading of 53.1. Readings above 50.0 indicate expansion in activity.
New business, a principal barometer of demand, rose only moderately and recorded its softest pace of expansion in close to four-and-a-half years. While export orders continued to grow faster than overall new business, international demand softened marginally compared with the previous month.
On employment, firms reported a modest pickup from June’s six-month low in hiring, extending a run of job creation into a seventh consecutive month. The improvement was limited in scope: a majority of companies indicated no change to headcount, and only a small fraction reported additional staff.
Cost dynamics shifted as input cost inflation eased for a fourth straight month, falling to its lowest level since January. Despite lower input-cost pressures, businesses reported that selling prices rose at the quickest pace in three months, reflecting efforts to pass some cost burdens on to clients.
Sentiment among service-sector firms weakened, with business confidence retreating to a seven-month low. This marked the fourth consecutive monthly decline in confidence, even though firms cited hopes for firmer demand ahead and a potential boost from increased tourism.
Activity across the wider private sector also showed signs of cooling. India’s Composite PMI, which combines services and manufacturing measures, eased to 54.3 in July from 57.1 in June. That reading was the weakest since March 2022 and pointed to a broad-based loss of momentum across private-sector activity.
Taken together, the July PMIs underline a notable slowdown in the pace of expansion, driven primarily by softer demand and a fall in business confidence. At the same time, firms continue to expand employment modestly and to adjust prices in response to changing cost pressures.