India’s Private Sector Growth Eases To Over Three-Year Low As July Flash PMI Falls To 54.3

India’s private sector activity expanded at its slowest pace in more than three years in July, with the HSBC Flash India Composite PMI Output Index declining to 54.3 from 57.1 in June. The latest reading marks the weakest pace of growth since March 2022, reflecting slower demand and a moderation in business activity, according to the HSBC Flash India PMI released on Friday.

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Although the index remained above the 50-mark that separates expansion from contraction, the survey showed that both output and new business grew at a slower pace than in previous months. The services sector was behind the slowdown, while the manufacturing sector was relatively stable.

Services Growth Slows as Manufacturing Shows Sturdiness

The HSBC Flash India Services PMI Business Activity Index fell to 53.1 from 57.4 for the month of July, indicating a slowdown in growth in the services sector.

In case of manufacturing, there was a mixed picture. The HSBC Flash India Manufacturing PMI Output Index rose to 57.0 from 56.3, indicating increased factory output. In contrast, the HSBC Flash India Manufacturing PMI fell marginally to 53.9 from 54.2, signifying slower growth in the manufacturing industry.

It was also observed that there was the slowest growth in production and sales in the private sector since early 2022. Businesses reported increasingly difficult market conditions, heightened competition, order cancellations, fewer client enquiries and shortages of key raw materials as factors affecting activity.

Demand Growth Moderates, Export Orders Improve

New business continued to increase at the start of the second quarter of FY27, but the pace of expansion slowed to its weakest level in nearly four-and-a-half years.

The moderation was most visible in the services sector, where both output and fresh orders recorded their slowest expansion in 53 months. Nevertheless, there were signs of improvement in manufacturing due to higher production.

The survey also indicated that overseas demand strengthened during the month. Export orders increased across both manufacturing and services, taking overall international sales growth to its highest level since March.

Cost Pressures Rise Across Businesses

The July survey showed inflationary pressures gathering pace as businesses faced higher operating costs. Companies cited increases in fuel, labour, transportation and raw material expenses, resulting in faster growth in input costs compared with June.

Businesses also raised selling prices at a quicker pace, with output charge inflation reaching its highest level since April as firms passed on part of the higher costs to customers.

Employment continued to expand for the seventh consecutive month, although hiring remained moderate overall. Service providers added jobs at a faster pace than manufacturers.

Commenting on the findings, HSBC Chief India Economist Pranjul Bhandari said renewed tensions in the Middle East prompted businesses to build inventory buffers to manage supply-side uncertainty. She added that purchasing activity and inventories increased alongside export orders, while companies continued to face higher price pressures as they sought to protect margins.

The latest PMI data indicates that India’s private sector remained in expansion during July, but the pace of growth slowed as softer domestic demand offset stronger export performance and manufacturing output.