India's Services PMI Soars To 11-Month High In July Driven By Strong Export Demand

The Indian services sector experienced significant growth in July, reaching an 11-month high. This increase was driven by a surge in new export orders and a notable rise in overall sales, according to a recent survey and reported by PTI.

The HSBC India Services PMI Business Activity Index recorded a score of 60.5 for July, slightly up from June's 60.4, marking the strongest expansion since August 2024. In the context of the Purchasing Managers' Index (PMI), a score above 50 signifies expansion, while below 50 indicates contraction.

"At 60.5, the services PMI indicated a strong growth momentum, led by a pick-up in new export orders," stated Pranjul Bhandari, Chief India Economist at HSBC.

The survey highlighted that sustained increases in new business intakes were pivotal to output growth. Indian service providers also saw improved international demand for their services, securing new work from regions such as Asia, Canada, Europe, the UAE, and the US. Looking forward, service providers remained optimistic about future output due to factors like efficiency gains and technological innovation.

On the pricing front, both input costs and output charges increased at faster rates compared to June. "The solid rise in output prices reflected greater cost burdens and demand strength," noted the survey. Bhandari added that this trend might change with recent CPI and WPI prints.

The Consumer Price Index (CPI) based retail inflation has stayed below 4% since February, standing at 2.1% in June. Meanwhile, wholesale price inflation turned negative after 19 months, declining by 0.13% in June.

The Reserve Bank of India's (RBI) rate-setting panel began deliberations on Monday to decide on the next bi-monthly monetary policy amid expectations of maintaining status quo. The Monetary Policy Committee is set to announce its decision on August 6.

Despite the sector's growth adding pressure on firms' capacity, hiring slowed down in July. The increase in employment was the slowest seen in 15 months. "The rate of job creation was only slight, broadly converging to its long-run average," mentioned the survey.

The HSBC India Composite PMI Output Index rose marginally from 61.0 in June to 61.1 in July, indicating rapid expansion not seen since April 2024. Composite PMI indices are weighted averages of manufacturing and services PMI indices based on official GDP data.

The PMI results for July showed mixed signals regarding India's private sector performance. While new orders and output grew at faster rates, job creation slowed down and business optimism waned. Additionally, inflationary pressures increased during this period.

The HSBC India Services PMI is compiled by S&P Global using responses from around 400 service sector companies through questionnaires.