India?s services growth slows to 53-month low in July despite strong export demand

India?s services sector continued to expand in July, but growth slowed sharply, according to the latest HSBC India Services PMI. The Business Activity Index fell to 53.3 in July from 57.4 in June, marking the weakest pace of expansion in 53 months, though remaining above the neutral 50.0 level.

New business inflows also grew at their slowest rate since February 2022, as firms reported softer demand, intense competition, fewer enquiries and delayed orders. However, export demand remained strong, with companies citing increased business from the UAE, UK and US. Among major segments, only Finance & Insurance recorded faster growth in output and sales.

Employment growth improved from June?s six-month low, although hiring remained modest. Around 6% of firms increased payrolls, while 92% reported no change. Lower bookings and weak sales also helped companies reduce backlogs at the fastest pace in nearly five years.

Input cost inflation eased to its lowest level since January and a six-month low overall, despite higher fuel, labour, material, technology and transport costs. At the same time, firms raised selling prices at the quickest pace since April.

At the broader level, the HSBC India Composite PMI Output Index declined from 57.1 in June to 54.3 in July, signalling the slowest private-sector growth since March 2022, although employment continued to rise and business confidence remained positive despite slipping to a seven-month low.

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