Business activity and new orders expanded at their weakest pace since early 2022.
Exports and hiring remained positive, while input-cost inflation eased during July.
Highlights
- India’s Services PMI declined to 53.3 in July from 57.4 in June.
- The latest reading marked the slowest services-sector expansion in 53 months.
- New business growth weakened due to softer demand and intense competition.
- Export orders remained strong, supported by demand from the UAE, UK and US.
- Hiring recovered from June’s six-month low but remained modest.
- India’s Composite PMI fell to 54.3, its weakest reading since March 2022.
India’s services sector continued to expand in July 2026, but the pace of growth slowed to its weakest level in nearly four-and-a-half years amid softer demand, competitive pressure and fewer customer enquiries.
The seasonally adjusted HSBC India Services Purchasing Managers’ Index fell sharply to 53.3 in July from 57.4 in June. A PMI reading above 50 indicates expansion, while a figure below 50 signals contraction.
Despite remaining in the growth zone, the July figure showed that momentum in one of India’s most important economic sectors had weakened significantly.
Growth in new business also slowed to its weakest pace since February 2022. Companies surveyed for the index linked the slowdown to tough competition, weaker market conditions, fading demand and the postponement of orders by customers.
Among the four major service-sector categories included in the survey, finance and insurance was the only segment to report faster growth in both output and sales.
However, international demand remained relatively strong. New export orders increased at a solid pace and grew faster than overall sales. Service providers reported better demand from customers in the United Arab Emirates, the United Kingdom and the United States.
Employment conditions also showed some improvement. Hiring recovered after falling to a six-month low in June, although the pace of job creation remained modest. Only around 6 per cent of surveyed companies increased their workforce, while 92 per cent reported no change in staff numbers.
Weak new sales allowed companies to clear their pending workloads. Outstanding business declined at the fastest pace in nearly five years, suggesting that firms had sufficient capacity to handle existing orders.
Companies remained optimistic about future growth due to expectations of better demand, improved market conditions, competitive pricing and higher inbound tourism. However, overall business confidence slipped to a seven-month low.
Input costs continued to rise due to higher expenses related to fuel, labour, technology, materials and transportation. Still, input-cost inflation eased to a six-month low and remained below its long-term average.
Service providers raised selling prices at the fastest pace since April, helping improve profit margins.
Meanwhile, the HSBC India Composite PMI, which tracks manufacturing and services together, fell to 54.3 in July from 57.1 in June. This represented the weakest private-sector expansion since March 2022, with the slowdown mainly driven by services.
