India’s services sector growth in July slowest in 53 months as demand softens. But new export orders rise.

India’s Services Sector Growth Slows to 53-Month Low

Theindiapostdaily.com – India’s services sector growth decelerated in July to its weakest pace in 53 months, according to a private survey released on Wednesday. The HSBC India Services Purchasing Managers’ Index (PMI), compiled by S&P Global, dropped to 53.3 from 57.4 in June, marking the lowest reading since February 2022. While the figure remained above the neutral threshold of 50.0, it fell short of the long-run average of 54.4.

Challenging market conditions, moderate new business inflows, and order postponements collectively slowed business activity across the service economy. The survey highlighted that slowing sales and output also influenced employment trends, with hiring activity remaining broadly stagnant and business confidence fading. Despite reaching a six-month low in June, July saw a modest improvement in job creation rates, with only 6% of firms reporting higher payroll numbers while 92% indicated no change.

Export Orders Provide Bright Spot Amid Softening Demand

Despite the overall growth slowdown, new export business emerged as a positive indicator with orders rising at a solid rate during the start of the second fiscal quarter. This export growth outpaced total sales growth, according to survey participants. Demand from clients in the UAE, the UK, and the US showed particular improvement, supporting the sector’s external performance.

Among the four broad areas of India’s service economy monitored by the survey, only finance and insurance recorded quicker rates of expansion in output and sales during July. Limited bookings and weak sales performances underpinned backlog clearances at service providers, following marginal increases observed in May and June. Although moderate, the pace of decline in outstanding business was the quickest in close to five years.

Business confidence at 7-month low. The July data highlighted another increase in input costs across the service economy, with panellists signalling greater fuel, labour, material, technology and transportation costs. That said, the rate of inflation was modest, the weakest in six months and below its long-run average, the survey said. Consumer services posted the strongest rate of cost inflation at the sub-sector level, although this was the softest since the start of 2026.

Across the service economy as a whole, output prices rose at the quickest pace since April. Hopes of better demand and market conditions, as well as plans to price competitively and forecasts of greater inbound tourism, supported positive sentiment among services companies. That said, the overall level of confidence slipped to a seven-month low in July, the survey noted.

What This Means for India’s Economy

The seasonally adjusted HSBC India Services PMI Business Activity Index is based on a single question asking how the level of business activity compares with the situation the month before. Reflecting the broader slowdown, HSBC India Composite PMI Output Index fell slightly to 54.3 in July from 57.1 in June, indicating the weakest pace of expansion since March 2022.

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. At the composite level, July’s upturn was the softest in 53 months, 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. “Hiring showed a moderate rebound, while profit margins improved as input costs softened and firms increased their selling prices.”

Frequently Asked Questions

What does the July PMI reading of 53.3 indicate? The PMI reading of 53.3 indicates that India’s services sector is still expanding, but at its slowest pace in 53 months. Any reading above 50.0 signals expansion, while below 50.0 indicates contraction.

Which service sub-sectors performed best in July? Finance and insurance recorded the quickest rates of expansion in output and sales during July, outperforming other service categories in the survey.

How did export orders contribute to the sector’s performance? New export orders rose at a solid rate in July, stronger than total sales growth. Demand from the UAE, UK, and US markets showed particular improvement, providing a bright spot amid softening domestic demand.

What factors are affecting business confidence? Increased input costs including fuel, labour, materials, technology and transportation are affecting business confidence. However, modest inflation rates and plans for competitive pricing are supporting positive sentiment among service companies.