Services PMI – India’s Services Sector Expands Further in July Despite Slower Growth

Services PMI – India’s services sector continued to record growth in July, although the pace of expansion moderated compared to the previous month, according to the latest HSBC India Services PMI survey released on Wednesday.

The seasonally adjusted HSBC India Services PMI Business Activity Index stood at 53.3 in July, down from 57.4 recorded in June. Even with the decline, the index remained comfortably above the 50-point threshold that separates expansion from contraction, indicating that business activity in the services industry continued to grow.

Overseas Demand Continues to Support Business Activity

A key driver behind the sector’s performance was sustained demand from international markets. Service providers reported stronger business from clients in the UAE, the United Kingdom, and the United States, contributing to healthy growth in export orders. According to the survey, overseas demand expanded at a faster pace than overall new business, providing additional support to the sector despite softer domestic conditions.

Businesses noted that export opportunities helped offset some of the challenges arising from slower local demand and changing market conditions.

New Orders Rise at a More Moderate Pace

The report showed that companies received new business for another consecutive month. However, the rate of growth slowed to its weakest level since February 2022. Firms attributed the moderation to softer customer demand, increased competition across the market, and a decline in customer enquiries compared with previous months.

Despite the slower pace of new orders, businesses continued to maintain growth, reflecting the sector’s resilience in a changing economic environment.

Hiring Improves as Companies Expand Workforce

Employment trends also showed improvement during July. After touching a six-month low in June, hiring activity strengthened as service providers added more employees to support ongoing operations and future business requirements.

Although the increase in staffing levels remained moderate, stronger recruitment in the services industry contributed positively to overall private-sector employment growth, indicating that companies continued to invest in workforce expansion.

Lower Cost Pressures Support Business Margins

HSBC Chief India Economist Pranjul Bhandari said the services sector maintained its growth momentum despite some easing in business activity. She noted that new business growth slowed across both domestic and overseas markets after several months of robust performance, while hiring witnessed a moderate recovery.

The survey also pointed to an improvement in profit margins. Input cost inflation eased to a six-month low and remained below its long-term average, even as businesses continued to face higher expenses related to fuel, labour, materials, technology, and transportation.

At the same time, companies raised selling prices at the fastest pace since April, helping offset operating costs and supporting profitability.

Business Confidence Remains Positive

Business sentiment stayed optimistic during July, supported by expectations of stronger demand, improving market conditions, and increased inbound tourism. However, the level of confidence eased to a seven-month low, suggesting that companies remained cautious about the near-term business environment despite maintaining a positive outlook.

The report indicates that firms continue to expect growth opportunities but are also monitoring evolving economic conditions and customer demand trends.

Composite PMI Signals Continued Private-Sector Expansion

The HSBC India Composite PMI Output Index, which combines manufacturing and services activity, registered 54.3 in July. The reading confirmed that India’s private sector remained in expansion territory, reflecting continued growth across both major segments of the economy despite a moderation from earlier months.

The latest PMI data suggests that while growth has become more measured, India’s services sector continues to benefit from resilient export demand, improving employment, and stable business conditions, helping sustain the broader momentum in private-sector economic activity.