India's private sector activity slowed sharply in July. The HSBC Flash India Composite PMI fell to 54.3 in July from 57.1 in June, marking the slowest expansion in private sector activity since March 2022.

Key Highlights

• India's Composite PMI fell to 54.3 in July, the slowest expansion since March 2022.
• Services PMI dropped to 53.1, its weakest level in 53 months, while manufacturing showed resilience.

Services PMI Hits 53-Month Low

The Services PMI also dropped to 53.1 in July from 57.4 in June, its weakest level in 53 months. Meanwhile, manufacturing showed signs of resilience, with the Manufacturing Output Index improving to 57.0 from 56.3, even as the headline Manufacturing PMI slipped marginally to 53.9 from 54.2. A reading above 50 indicates expansion, while a reading below 50 signals contraction.

Pranjul Bhandari, Chief India Economist, HSBC, said: "Renewed tensions in the Middle East have once again resulted in firms building buffers to manage the uncertainties around the longevity of the supply-side shock. Finished goods and input inventories increased alongside a pick-up in purchasing volumes. Both, output and new export orders rose, even as the overall manufacturing growth eased slightly. Price pressures firmed, with output charge inflation gathering pace and signalling a renewed push to protect margins."

The growth in new orders slowed to its weakest level in nearly four-and-a-half years. S&P Global said businesses faced increasingly difficult market conditions, stronger competition, order cancellations, fewer client enquiries, and shortages of key raw materials.

Manufacturers and service providers both reported stronger growth in international sales, with manufacturing firms recording the stronger performance. Overall export growth was the strongest since March.

Inflation Pressures Intensify

According to the HSBC PMI report, companies reported faster increases in input costs due to higher fuel, labour, raw material, and transportation expenses. Businesses passed on some of these higher costs to customers, pushing output price inflation to its fastest pace since April.

Also Read: India's Manufacturing PMI Slows to 54.2 in June as Demand Moderates

Hiring Continues Despite Slower Growth

Private sector firms continued to add jobs in July, extending the hiring streak to seven months. Employment growth strengthened slightly from June, with service providers hiring more workers than manufacturers. Outstanding business across the private sector fell for the first time in three months as service providers cleared pending work — though manufacturers continued to report rising backlogs.

Business Confidence Hits Six-Month Low

Business optimism weakened to a six-month low and remained below its long-run average. Confidence improved among manufacturers but declined in the services sector, with firms still expecting better market conditions and stronger demand over the next year. Manufacturers also increased purchasing activity, built up input inventories, and raised stocks of finished goods after a decline in June, supported by improved supplier performance.