India’s Services Sector Reaches 11-Month Peak Driven by Export Orders and Sales Growth
India’s services sector has recorded its most significant growth in nearly a year, driven by a surge in export orders and robust sales, as revealed by the latest HSBC India Services Purchasing Managers’ Index (PMI). The PMI rose to 60.5 in July, up from 60.4 in June, marking the highest level since August 2024. This positive trend indicates a strong expansion in the services industry, with a reading above 50 signifying growth.
Strong Growth Momentum
The July PMI data reflects a strong growth momentum within India’s services sector, primarily fueled by an increase in new export orders. Pranjul Bhandari, Chief India Economist at HSBC, emphasized that the index’s rise to 60.5 indicates a robust expansion, largely attributed to heightened international demand. The report highlights that service providers in India have received new business from various regions, including Asia, Canada, Europe, the UAE, and the United States. This influx of international work is a key driver of the sector’s output expansion, showcasing the global competitiveness of Indian services.
Optimism Amid Rising Costs
Despite the positive growth figures, the report also points to a rise in both input and output prices compared to June. The increase in charges is linked to higher operating costs and strong demand within the sector. Bhandari noted that while prices have risen slightly faster than in the previous month, future trends may vary based on recent Consumer Price Index (CPI) and Wholesale Price Index (WPI) data. Retail inflation has remained below 4 percent for five consecutive months, with a notable drop to 2.1 percent in June. Conversely, wholesale inflation turned negative in June, marking a decline of 0.13 percent after a prolonged period of positive growth.
Employment Growth Slows
While the services sector shows strong activity, job creation has slowed down significantly. The report indicates that employment growth in July was the lowest recorded in 15 months, with fewer than 2 percent of companies hiring additional staff. This slowdown in job creation raises concerns about the sector’s ability to sustain its growth momentum in the long term. The findings come as the Reserve Bank of India’s Monetary Policy Committee commenced its three-day policy meeting, with expectations that the central bank will maintain steady interest rates amid ongoing economic uncertainties.
Composite PMI Indicates Overall Expansion
In addition to the services PMI, the HSBC India Composite PMI Output Index, which encompasses both manufacturing and services activities, also saw a slight increase, rising to 61.1 in July from 61.0 in June. This marks the strongest expansion in overall private sector output since April 2024. The survey, conducted by S&P Global, collected responses from approximately 400 services companies across India, providing a comprehensive overview of the sector’s performance and outlook.
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