NEW DELHI: Growth in India’s services sector slowed to the lowest level in over four years in July as business activity and new business inflows were dampened by softer demand and intense competition, a monthly private survey showed on Tuesday.
The HSBC India Services Purchasing Managers’ Index (PMI), compiled by S&P Global, fell to 53.3 in July from 57.4 in June. The July reading was the lowest since February 2022, when the index stood at 51.8. “Panel member comments suggested that growth was constrained by fierce competition, fading demand, softer market conditions, and order postponements,” the survey said.
The July reading remained above the 50-mark, which separates expansion from contraction. The index has now stayed in expansionary territory for 60 consecutive months.
New business inflows also expanded at a moderate pace, the slowest since February 2022. Among the four broad segments tracked by the survey — consumer services; finance and insurance; real estate and business services; and transport, information and communication — only finance and insurance recorded quicker rates of expansion in both new business and output, the survey said.
“India’s services sector continued to expand in July, albeit at a slightly slower pace, as new business growth eased in both domestic and export markets after several months of strong performance,” said Pranjul Bhandari, chief India economist at HSBC.
New export orders, however, rose at a solid pace at the start of the second quarter of 2026-27 and outperformed total sales, the survey said. According to the survey, demand improved from clients in the United Arab Emirates, the UK, and the US.
Job creation also improved in July after sinking to a six-month low in June. The uptick remained modest, with only 6 per cent of firms reporting higher payroll numbers and the vast majority (92 per cent) indicating no change.
“Hiring showed a moderate rebound, while profit margins improved as input costs softened and firms increased their selling prices,” Bhandari added.
Input costs continued to rise in July, driven by higher fuel, labour, material, technology, and transportation costs. However, the pace of input cost inflation eased to a six-month low.
Consumer services posted the strongest rate of input cost inflation at the sub-sector level but the slowest growth in output prices. Meanwhile, real estate and business services recorded the strongest rise in output prices. Across the services economy as a whole, output prices rose at the fastest pace since April, S&P said.
The moderation in services activity came alongside a slowdown in manufacturing. The manufacturing PMI eased to a near five-month low of 53.5 in July from 54.2 in June.
The HSBC India Composite PMI Output Index, a weighted average of the Manufacturing Output Index and the Services Business Activity Index, also fell to a more than four-year low of 54.3 in July from 57.1 in June.
“There was a particularly sharp slowdown in the service economy, while factory production growth ticked marginally higher. Increases in sales volumes eased in a broad-based manner, with manufacturers outperforming service providers,” the survey observed.
However, employment growth was stronger in the services sector, offsetting a slowdown in manufacturing and contributing to faster job creation at the composite level. The rate of input cost inflation across the private sector eased to a six-month low, but output charges rose at the fastest pace since April, S&P said.
Source: Business Standard / Millennium Post
