India Services Sector Growth Strengthens: PMI Hits 60.5, Hiring Slows

India Services Sector Growth Surges In July — But Where Are The Jobs?

India’s services sector clocked another solid month in July, with the HSBC India Services PMI® Business Activity Index rising to 60.5 — a slight uptick from 60.4 in June. Wondering what that means? It signals the fastest output growth since August 2024, showing that businesses are buzzing with activity. But here’s the twist: while output rose, job creation hit a 15-month low. Surprised?

Fewer than 2% of firms added new staff, and most kept their teams unchanged. Why the hiring freeze despite the growth? Experts point to cautious optimism — while international demand surged, especially in sectors like Finance & Insurance, others like Real Estate lagged behind.

Even with rising input costs and output charges, firms stayed upbeat. However, a dip in future expectations hints that companies are playing it safe. With the Composite PMI rising to 61.1, the highest since April 2024, are we headed for steady growth.

Growth Drivers In July 

Services providers logged higher new work from Asia, Canada, Europe, UAE, and the U.S., driving sharp growth in total new orders and output. Among sectors, Finance & Insurance reported the strongest activity and order intake, while Real Estate & Business Services posted the slowest growth. Firms continued to experience robust demand, with business confidence remaining positive overall. Despite this, expectations changed subtly, and the Future Output Index fell to its lowest level since March 2023. The slowdown in hiring revealed caution, yet firms still expand operations. Demand trends and international outreach supported services growth, and companies remained alert to global market shifts.

Employment Growth Softness 

The rate of job creation slowed to its weakest pace in 15 months, despite optimism in future business activity. Less than 2 percent of companies hired new staff in July, aligning employment growth close to its long-term average. Most firms retained existing workforces, and workforce expansion remained modest. Private sector hiring weakened, consistent with the composite PMI future output decline. While firms maintained positive sentiment, they tempered plans for expansion. Employment softness stemmed not from reduced confidence in growth but from caution around costs and inflation. Companies waited for clarity before accelerating hiring, even as demand and output remained firm.

Inflation Pressures And Composite Growth

Are rising prices here to stay? July saw inflationary pressures intensify, with both input costs and output charges accelerating more than they did in June. In fact, output price inflation surpassed its long-run average, raising questions about future cost management for businesses. Yet, despite this, the Composite PMI Output Index inched up from 61.0 to 61.1, marking a solid expansion across both the services and manufacturing sectors. Sales growth reached a 15-month high, but are companies optimistic? Not entirely. The Future Output Index dropped to its lowest since March 2023, causing firms to scale back hiring plans. While inflation and global commodity prices remain a concern, overall business activity continued to hold firm — a sign that strong demand and adaptable strategies are helping companies stay on course.

(With Inputs From ANI)

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