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

India’s service economy grew at its slowest pace in nearly 4.5 years in July as challenging market conditions, moderate new business inflows, and order postponements slowed business activity, a private survey showed on Wednesday.

The HSBC India Services Purchasing Managers’ Index (PMI), compiled by S&P Global, fell to 53.3 in July from 57.4 in June, the lowest since February 2022.

The reading was also below the long-run average of 54.4 but above the neutral reading of 50.0, which separates expansion from decline.

The survey said the slowing sales and output also impacted employment as hiring activity remained broadly stagnant and business confidence faded.

After sinking to a six-month low in June, there was an improvement in the rate of job creation during July. The uptick was modest, however, as only 6% of firms reported higher payroll numbers and a vast majority (92%) indicated no change, the survey said.

Despite the growth slowdown in July, new export business remained a bright spot with orders rising at a solid rate at the start of the second fiscal quarter, stronger than total sales growth. According to survey participants, demand from clients in the UAE, the UK and the US, in particular, improved.

Of 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 in July, the survey said.

“Limited bookings and weak sales performances underpinned backlog clearances at service providers during July, following marginal increases in May and June. Although moderate, the pace of decline in outstanding business was the quickest in close to five years,” 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.”

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. Nevertheless, consumer services was at the bottom of the charge inflation rankings, whereas real estate and business services occupied the top spot.

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.

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.

On employment, the survey noted that stronger growth in the service economy more than offset a slowdown in manufacturing and contributed to faster job creation at the composite level.