India's services growth at 11-month high in July amid rise in exports

Services PMI at 60.5, was 60.4 in June

Indian service providers started the second quarter on a strong footing, as output and new order intakes rose at the fastest rates since August 2024 in July, aided by robust expansion in demand, international sales and output, said a private survey on Tuesday.

 

The HSBC India services purchasing managers' index (PMI), compiled by S&P Global, stood at 60.5 in July, from 60.4 in June. The index has now been above the neutral 50 mark, which separates contraction from expansion, for four years straight.

 

“Sustained increases in new business intakes were identified by survey members as the main aspect behind output growth. According to them, advertising, demand buoyancy and new client onboarding all underpinned the latest upturn in new orders. July's rise was sharp and the second-quickest in nearly a year,” said the survey.

 

 

The survey noted that overseas demand particularly improved from Asia, Canada, Europe, the UAE and the US. The rate of expansion in external sales was sharp and the second-fastest in a year.

 

Pranjul Bhandari, chief India economist at HSBC, said that the services PMI indicated a strong growth momentum, led by a pick-up in new export orders.

 

“Future optimism rose, but remained below H1 FY25 levels. On the price front, both input and output prices rose a tad faster than in June, but this could change going forward as indicated by the recent CPI and WPI prints,” she added.

 

Sector data indicated that finance & insurance was the best performing sector in terms of both new orders and business activity. On the other side of the spectrum was real estate & business services, where the slowest increases were registered.

 

“Among the factors supporting business confidence were efficiency gains, marketing, tech innovation and a growing online presence. Services companies signalled another increase in their expenses at the start of the second financial quarter. Qualitative data pointed to greater food, freight and labour costs. The rate of inflation quickened from June, though remained mild in the context of historical data,” the survey noted.

 

However, on the employment front, the survey noted that July data pointed to the weakest increase in services sector employment in 15 months. The rate of job creation was only slight, broadly converging to its long-run average. Fewer than two per cent of companies took on additional staff, with the vast majority indicating no change from June.

 

The resilience in the services sector mirrors strength in the manufacturing sector, which is grappling with external headwinds. On Friday, data showed that India’s manufacturing PMI rose to a 16-month high of 59.1 in July, up from 58.4 in the previous month, even as concerns are building over the potential impact of higher US tariffs announced by US President Donald Trump.