India Services Sector Expansion Moderates to 53.3 in July Despite Rebound in Hiring: HSBC

New Delhi, Aug 6 (KNN) India’s services sector growth slowed to a four-and-a-half-year low in July, as easing demand and rising competition weighed on new business inflows, according to a monthly survey released on August 5, 2026.

The seasonally adjusted HSBC India Services PMI Business Activity Index declined to 53.3 in July from 57.4 in June, marking the weakest expansion in 53 months. Despite the slowdown, the index remained above the neutral 50 mark, indicating continued growth in output.

New Orders See Moderation

Pranjul Bhandari, Chief India Economist, HSBC, said, “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,” adding that the pace of expansion was the weakest since February 2022, PTI reported.

Survey participants cited factors such as intense competition, softer market conditions, fading demand, and order postponements as key constraints on growth.

Employment Recovery, Costs Rise, Margins Improve

Hiring activity recorded a mild improvement after dipping to a six-month low in June. However, job creation remained limited, with only 6% of firms reporting an increase in workforce numbers, while the majority indicated no change.

“Hiring showed a moderate rebound, while profit margins improved as input costs softened and firms increased their selling prices,” Bhandari noted.

Input costs continued to increase across the sector, driven by higher expenses related to fuel, labour, materials, technology, and transportation. At the same time, firms raised selling prices, contributing to an improvement in profit margins.

Exports Support and Business Confidence

New export business remained relatively resilient, with companies reporting gains from markets such as the UAE, the United Kingdom, and the United States.

Overall business sentiment stayed positive, supported by expectations of improved demand, competitive pricing strategies, and a potential rise in inbound tourism. However, confidence levels fell to a seven-month low.

Composite Output Slows

The HSBC India Composite PMI Output Index, which combines services and manufacturing activity, fell to 54.3 in July from 57.1 in June—its weakest pace of expansion since March 2022.

While factory output growth saw a slight uptick, a sharper slowdown in services dragged overall expansion lower. Employment growth at the composite level improved, largely supported by the services sector.

Outlook

The survey indicates that while India’s services sector continues to expand, sustaining momentum may depend on a revival in demand conditions and easing competitive pressures in the coming months.

(KNN Bureau)