India’s Services Sector Growth Slump To Weakest Pace in Over Four Years

New Delhi: Growth in India’s dominant services sector slumped to its weakest pace in over four years in July as demand was weighed down by fierce competition ‌and fading client appetite. The July reading, however, saw softer demand, competitive pressures and fewer enquiries weighed on business activity across the country, a private survey showed on Wednesday.

As per the survey, the seasonally adjusted HSBC India services PMI business activity index fell from 57.4 in June to 53.3 in July, registering the weakest growth rate in close to four-and-a-half years. Despite the significant fall in services activity, the reading in July remained above the neutral mark of 50, signalling another expansion in the index.

Commenting on the survey, Pranjul Bhandari, chief India economist at HSBC said that India’s services sector continued to expand in July, albeit at a slightly slower pace, as new business growth eased in both domestic and export markets after several months of strong performance. “Hiring showed a moderate rebound, while profit margins improved as input costs softened and firms increased their selling prices,” Bhandari said.

The survey, however, showed that new business inflows expanded at a moderate pace, the slowest since February 2022. “According to panel members, growth was constrained by fierce competition, fading demand, softer market conditions and order postponements,” the survey noted.

On the job front, the survey said, after sinking to a six-month low in June, there was an improvement in the rate of job creation during July. “The uptick was, however, modest, as only 6 percent of firms reported higher payroll numbers and the vast majority (92 per cent) indicated no change,” it said.

On the prices front, the July data highlighted another increase in input costs across the service economy, with panellists signalling greater fuel, labour, material, technology and transportation costs. “Meanwhile, new export business remained a bright spot, with firms citing gains from the UAE, UK and US. Also, service providers continued to add to their payrolls,” the survey said.

On business confidence in India, the survey also pointed out that hopes of better demand and market conditions, as well as plans to price competitively and forecasts of greater inbound tourism, supported positive sentiment among services companies. “The overall level of confidence, however, slipped to a seven-month low in July,” it said.