India’s service PMI drops marginally to 60.3 in July

Indian service providers saw sustained growth in business activity in July, according to the latest HSBC India Services PMI (Purchasing Managers’ Index) survey conducted by S&P Global. The HSBC India Services Business Activity Index was 60.3 in July, slightly down from 60.5, albeit well above the neutral 50.0 mark for the 36th consecutive month. The July number was driven by higher sales volumes, with respondents noting strong demand, investments in technology, and a growing online presence.

The HSBC India Composite Output Index was 60.7, just down from 60.9 in June, and remained above 50.0 for the 36th month in a row. Manufacturing led the growth, continuing its trend since February.

New export orders grew at the third-highest rate since the series began in September 2014, driven by rising global demand for Indian services. Panelists cited countries such as Austria, Brazil, China, Japan, Singapore, the Netherlands, and the US as some of the sources of this increased demand, it states.

New work volumes increased sharply and were notably above the long-term average. Manufacturers saw a rise in new orders despite a slower expansion rate, while job creation remained solid across both sectors. 

International sales marked its third-highest rate in almost a decade, contributing to a rise in overall new orders. This increase in orders led to the hiring of both full- and part-time workers. However, rising wages and material costs pushed business expenses higher, accelerating inflation 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 states.

However, inflation for services reached its highest level in nearly 11 years in July, driven by increased costs in both goods and services. Manufacturing firms reported stronger cost pressures compared to service providers.

The composite PMI for India indicated continued strong growth in July, though at a slightly slower pace than June, as noted by Pranjul Bhandari, chief India Economist at HSBC. He explained that robust demand, reflected in higher new orders from both domestic and international markets, led companies to increase their hiring levels.

"On the price front, higher wages and material costs led to a further increase in input costs. 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 yearahead,” Bhandari adds.