Economy – India’s Private Sector Growth Continues Despite Slower Services Momentum

Economy –  India’s private sector maintained its expansion in July, although the pace of growth slowed as the services industry lost some momentum while manufacturing continued to perform steadily, according to the latest HSBC Flash India PMI survey.

India’s private sector continued to record business expansion in July, supported by stronger manufacturing activity and healthy export demand, even as growth in the services sector cooled. The latest HSBC Flash India Purchasing Managers’ Index (PMI), released on Friday, showed that overall business activity remained in positive territory despite a softer pace compared to the previous month.

Composite Business Activity Slows but Remains in Expansion

The seasonally adjusted HSBC Flash India Composite PMI Output Index declined to 54.3 in July from 57.1 in June. Since a PMI reading above 50 reflects an expansion in economic activity, the latest figures indicate that businesses across the country continued to grow, although at a more moderate pace than in the previous month.

The slowdown was largely linked to weaker performance in the services sector, where business activity eased noticeably. The Services PMI Business Activity Index dropped to 53.1 from June’s 57.4, reflecting softer demand and a slower pace of new business growth.

Manufacturing Sector Shows Better Resilience

Unlike services, manufacturing activity remained comparatively stronger during July. The Manufacturing PMI Output Index improved to 57.0 from 56.3 in June, highlighting increased production levels across factories. However, the headline Manufacturing PMI edged slightly lower to 53.9 from 54.2, suggesting that while production increased, overall operating conditions became marginally less favourable.

Survey findings pointed to several factors affecting business growth, including difficult market conditions, intense competition, cancelled orders, reduced customer enquiries and shortages of important raw materials. These challenges contributed to slower growth in both output and new business across sectors.

Export Orders Continue to Support Business Growth

Despite weaker domestic demand, overseas business remained a major source of strength for Indian companies. Export orders increased at a faster pace across both manufacturing and services firms during July.

At the combined level, international sales expanded at their strongest rate since March, reflecting sustained global demand for Indian goods and services. The rise in export business helped offset some of the slowdown witnessed in the domestic market.

Supply Chain Concerns and Rising Cost Pressures

Pranjul Bhandari, Chief India Economist at HSBC, said that renewed geopolitical tensions in the Middle East encouraged companies to build additional inventory as a precaution against potential supply disruptions.

According to her assessment, businesses increased both finished goods and input stock levels while also raising purchasing volumes to reduce the impact of possible supply-side uncertainties. She also noted that manufacturing output and export orders continued to strengthen even though overall manufacturing growth eased slightly.

Bhandari further observed that pricing pressures intensified during the month, with companies raising output prices at a faster pace as they sought to protect profit margins from increasing costs.

Employment Growth Continues While Confidence Softens

Employment across India’s private sector expanded for the seventh consecutive month, although hiring remained measured rather than aggressive. Services companies accounted for most of the new jobs created during July, while manufacturers continued to report growing levels of unfinished work, indicating sustained production demand.

Business confidence, however, slipped to its lowest level in six months. Manufacturers expressed greater optimism about future prospects, whereas sentiment among service providers weakened. Even so, many firms remained hopeful that improving market conditions and stronger customer demand over the coming year would support future business growth.