India’s services PMI slows down in July

New Delhi: India's services sector growth slowed down in July after rebounding from a five-month low in the previous month, according to a business survey released on Monday. Despite the slowdown, investments in technology, online offerings, new business gains, and robust demand propelled a swift expansion in international sales in July, the survey noted.

The HSBC India Services Purchasing Managers' Index (PMI), compiled by S&P Global, slipped to 60.3 in July from 60.5 in June. The index had reached a six-month high of 61.8 in January. The PMI reading has remained above the 50-mark, which separates expansion from contraction, for 35 consecutive months.

Read this | At 72%, service sector dominates new business registrations in April

This slowdown in services growth mirrors a similar easing in the manufacturing PMI, which fell to 58.1 in July from 58.3 in June. However, the latest services PMI undershot HSBC’s forecast of 61.1, as mentioned in its Flash Services PMI Business Activity Index for July.

"Indian service providers experienced a further upturn in business activity during July. Survey respondents mostly cited investment in technology, online offerings, new business gains, and rosy demand as the main drivers of growth," the survey said.

"Higher wage and material costs continued to push up business expenses, with the overall rate of inflation quickening from June. Stronger cost pressures and positive demand trends contributed to the steepest rise in prices charged for the provision of services for seven years," it added.

India's services sector, one of the world's fastest-growing, accounts for more than half of the country's gross domestic product (GDP). India's GDP expanded at a blistering 8.2% in 2023-24, ably supported by January-March quarter growth of 7.8%, better than the Reserve Bank of India's (RBI's) revised GDP growth forecast of 7% for the fiscal year.

Meanwhile, the HSBC India Composite Output Index edged down to 60.7 in July from 60.9 in June. This index has remained above the critical 50 threshold for 36 months, indicating sustained strong growth momentum.

“India’s composite PMI recorded another month of robust expansion in July, albeit at a slightly slower pace than in June. Robust demand conditions, reflected by increased new orders from both domestic and international markets, led firms to increase hiring levels. On the price front, higher wages and material costs led to a further increase in input costs," said Pranjul Bhandari, chief India economist at HSBC.

"Consequently, output prices rose at the fastest pace in over 11 years. Service sector activity rose at a slightly slower pace in July, with new business increasing further, primarily driven by domestic demand. Looking ahead, services firms remained optimistic about the outlook for the year ahead," Bhandari added.

Also read | Shrinking informal economy rings alarm bells for jobs in India