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India's services sector remained in expansion territory in July, but growth slowed sharply, according to the latest HSBC India Services PMI. The Business Activity Index dropped to 53.3 from 57.4 in June, marking the slowest pace of expansion in 53 months, although it stayed above the 50-point threshold that separates growth from contraction.
New business growth also weakened to its slowest pace since February 2022, with firms citing softer demand, heightened competition, fewer customer enquiries and delayed orders. Export demand, however, remained resilient, supported by stronger business from the UAE, the UK and the US. Among the major sectors, only Finance & Insurance recorded faster growth in both output and sales.
Employment growth picked up from June's six-month low, though hiring remained subdued. About 6% of surveyed firms added staff, while 92% kept workforce levels unchanged. Softer sales and lower order inflows also enabled companies to reduce outstanding business at the fastest pace in nearly five years.
Cost pressures eased, with input price inflation falling to its lowest level since January and a six-month low overall, despite increases in fuel, labour, material, technology and transport costs. Even so, firms raised selling prices at the fastest rate since April.
At the broader level, the HSBC India Composite PMI Output Index fell to 54.3 in July from 57.1 in June, indicating the slowest pace of private-sector expansion since March 2022. Despite the slowdown, employment continued to rise, while business confidence remained positive, though it slipped to a seven-month low.
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