India’s services sector saw a modest improvement in July, with the HSBC Services PMI rising to 60.5 from 60.4 in June—marking the fastest growth rate since August 2024 and staying well above the long-term average of 54.2. Growth was driven by new export orders, strong advertising, and robust demand. International demand, especially from Asia, Europe, the US, and the UAE, also surged. Finance and insurance outperformed, while real estate lagged.
Despite the rise in output and new orders, job creation remained weak, and inflationary pressures increased due to higher food, freight, and labour costs. The Composite PMI, which includes manufacturing, also edged up to 61.1, pointing to a strong private sector momentum despite soft hiring and capacity constraints.
India’s services sector recorded a slight improvement in July, as reflected by the HSBC India Services Business Activity Index, or services PMI, which rose to 60.5 from 60.4 in June. This indicates another strong rise in output and marks the fastest rate of growth since August 2024.
HSBC India Services Business Activity Index
A reading above 50 signals expansion in the sector, below 50 indicates contraction, and 50 implies no change. The July PMI score stood well above its long-term average of 54.2. Survey respondents attributed the growth to strong advertising campaigns, onboarding of new clients, and robust demand. The increase in activity during July was marked as sharp and the second-fastest in nearly a year, just behind June.
Pranjul Bhandari, Chief India Economist at HSBC, said, “At 60.5, the services PMI indicated a strong growth momentum, led by a pick-up in new export orders. Future optimism rose but remained below 1H25 levels. On the price front, both input and output prices rose a tad faster than in June but this could change going forward as indicated by the recent CPI and WPI prints.”
Service providers also saw a stronger boost in international demand for their offerings. Most of the overseas orders came from regions including Asia, Canada, Europe, the UAE, and the US. The rate of expansion in foreign sales was also sharp and marked the second-fastest pace over the past year, just behind May.
Among the sectors, finance and insurance recorded the highest performance in terms of both new orders and business activity. In contrast, real estate and business services posted the slowest growth in these areas.
Service providers remained generally optimistic about their business outlook for the year ahead. They cited improved efficiency, increased marketing efforts, advances in technology, and a growing online presence as the main factors driving their confidence.
On the pricing front, input costs and output prices rose at a quicker pace than in June, attributed to rising food, freight, and labour expenses. “The rate of inflation quickened from June, though remained mild in the context of historical data,” the report said. Anecdotal evidence pointed out that the surge in output prices stemmed from elevated cost pressures combined with strong demand.
Consumer services saw the highest rise in input cost inflation during July, while the fastest increase in output prices was reported by Transport, Information & Communication firms.
Work backlogs also rose significantly, reaching their highest level in nearly five years. Surveyed companies linked the increase in backlogs to capacity constraints caused by growing new business volumes and pending payments from clients.
In terms of employment, July witnessed the weakest rise in services sector jobs in the past 15 months. The rate of hiring was slight and aligned closely with the long-term trend. The report mentioned that fewer than 2% of firms added new staff, with most respondents noting no change from June.
The HSBC India Composite PMI Output Index, which includes manufacturing, ticked up marginally from 61.0 in June to 61.1 in July, indicating a sharp pace of growth—the fastest since April 2024.
Overall, July’s PMI results presented a mixed outlook for India’s private sector. While new orders and output saw accelerated growth, hiring momentum slowed, and business optimism waned. Meanwhile, inflationary pressures continued to rise. On the composite level, the rate of sales growth reached a 15-month high.
