Services PMI falls to 53.3 in July, slowest growth in nearly 4.5 years

India's services sector expanded in July, but activity and new business grew at their weakest pace since early 2022, even as exports and hiring remained resilient

India’s services sector expanded at its weakest pace in 53 months in July as softer demand, competitive pressures and fewer enquiries weighed on business activity, according to the HSBC India Services Purchasing Managers’ Index (PMI) released on Wednesday.

 

The seasonally adjusted Services PMI Business Activity Index fell to 53.3 in July from 57.4 in June. Although the reading remained above the neutral mark of 50, indicating expansion, it pointed to the slowest growth in nearly four-and-a-half years.

 

Pranjul Bhandari, chief India economist at HSBC, 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. Hiring showed a moderate rebound, while profit margins improved as input costs softened and firms increased their selling prices."

 

 

New business inflows also increased at their weakest pace since February 2022. Survey respondents attributed the slowdown to fierce competition, fading demand, softer market conditions and the postponement of orders.

 

Among the four broad areas of the services economy covered by the survey, only finance and insurance recorded faster growth in output and sales.

Exports and employment remain resilient

New export orders rose at a solid pace in July and grew faster than total sales. Service providers reported stronger demand from clients in the United Arab Emirates, the United Kingdom and the United States.

 

Hiring also improved after falling to a six-month low in June. However, the pace of job creation remained modest, with only 6 per cent of surveyed firms reporting an increase in payroll numbers. Around 92 per cent reported no change. 

Backlogs decline as sales lose momentum

Limited bookings and weak sales prompted service providers to clear outstanding work during July, after backlogs had increased marginally in May and June.

 

The decline in outstanding business was moderate but the fastest in nearly five years, indicating that firms had sufficient capacity to process existing orders as new work weakened.

 

Business confidence remained positive, supported by expectations of improved demand and market conditions, competitive pricing plans and forecasts of higher inbound tourism. However, overall optimism slipped to a seven-month low.

Input cost inflation eases

Input costs continued to rise during July as firms reported higher fuel, labour, material, technology and transportation expenses.

 

However, the rate of input cost inflation eased to a six-month low, remained modest and was below its long-term average. Consumer services recorded the fastest cost inflation among the surveyed segments, though the rate was its lowest since the beginning of 2026.

 

Despite softer cost pressures, service providers raised selling prices at their fastest pace since April. Real estate and business services recorded the strongest increase in charges, while consumer services posted the weakest.

Composite PMI falls to 54.3

Growth across India’s private sector also lost momentum in July. The HSBC India Composite PMI Output Index fell to 54.3 from 57.1 in June, signalling the weakest expansion since March 2022.

 

The slowdown was led by services, while manufacturing output growth improved marginally. Sales growth eased across both sectors, though manufacturers outperformed service providers.

 

Employment growth at the composite level accelerated as stronger hiring in services more than offset slower job creation in manufacturing.

 

Private-sector input cost inflation eased to a six-month low, while selling prices increased at their fastest pace since April.