India services growth hits 11-month high in July on stronger exports: PMI

[BENGALURU] Growth in India’s services sector accelerated to an 11-month high in July, driven by strong international demand and sustained domestic sales, a survey showed on Tuesday (Aug 5).

The HSBC India Services Purchasing Managers’ Index (PMI), compiled by S&P Global, inched up to 60.5 in July from 60.4 in June, confounding a preliminary estimate that showed a drop to 59.8.

PMI readings above 50 indicate growth in activity on a monthly basis while those below point to a contraction. The latest reading showed the dominant services sector has been expanding for four years.

The new export business sub-index, a key gauge of international demand, showed a marked acceleration in July, registering the second-strongest expansion in a year.

Total new business remained robust despite easing slightly from June’s pace, supported by advertising efforts and new client acquisitions.

Among service categories, finance and insurance emerged as the top performer for both new orders and business activity, while real estate and business services recorded the slowest growth.

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Despite robust demand firms significantly slowed the pace of hiring to a 15-month low.

Price pressures intensified in July as firms faced higher costs for food items, freight and labour. Service providers passed these increases on to customers, with the rate of charge inflation slightly exceeding input cost inflation.

Any acceleration in inflation could affect the Reserve Bank of India’s monetary policy decision-making. The central bank is expected to hold its repo rate steady at 5.5 per cent at its Aug 4 to 6 meeting but cut its key policy rate once next quarter, according to a Reuters poll.

Business confidence improved as firms anticipated benefits from marketing initiatives, technological innovation and growing online presence.

The HSBC India Composite PMI Output Index, which includes manufacturing, edged up to 61.1 in July from 61 in June, indicating the strongest expansion since April 2024. REUTERS

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