HSBC India Services PMI at 11-Month High of 60.5 in July

August 5, 2025: India’s services sector demonstrated robust growth in July 2025, with the HSBC India Services Purchasing Managers’ Index (PMI) reaching an 11-month high of 60.5, a marginal increase from June’s 60.4. This strong performance, according to the latest data from S&P Global, was driven by strong external demand and resilient domestic activity, although it was tempered by a notable slowdown in job creation and rising cost pressures.

Understanding the Purchasing Managers’ Index (PMI)

The PMI is a key economic indicator that provides a timely and forward-looking view of economic health. It is based on monthly surveys sent to purchasing managers at private sector companies. These managers are asked to report whether business conditions, such as new orders, output, employment, and prices, have improved, deteriorated, or remained unchanged compared to the previous month. The responses are then compiled into a single index number.

The significance of the PMI is interpreted around the 50-point mark:

• A reading above 50 indicates that the sector is expanding. The further the number is above 50, the faster the rate of expansion.
• A reading below 50 signals that the sector is contracting. The further the number is below 50, the faster the rate of contraction.
• A reading of exactly 50 indicates no change in business activity.

Because the PMI data is often released earlier than official government statistics like GDP or industrial production, it is considered a leading indicator of economic activity. It provides a valuable, real-time snapshot of the economy that is closely watched by investors, businesses, and central banks when making decisions.

Export Orders Lead the Upswing

The primary driver behind the services sector’s expansion was an increase in new client onboarding, successful advertising campaigns, and a surge in export orders. Indian service providers secured new business from across the globe, including key markets in Asia, Canada, Europe, the UAE, and the US. Within the various sub-sectors, finance and insurance showed the most robust performance, while real estate and business services lagged behind.

Employment Growth Slows

Despite the strong demand, hiring momentum weakened significantly in July. Fewer than 2% of surveyed companies reported an increase in staffing levels, marking the slowest rate of employment growth in 15 months. This was compounded by accelerating cost pressures, with input cost inflation picking up pace due to rising food, freight, and labour expenses. In response, service providers increased their output charges at a faster rate than in June, indicating intensified pricing pressure across the sector.

Manufacturing and Composite PMI Highlights

The manufacturing sector also posted solid gains, with the HSBC India Manufacturing PMI rising to a 16-month high of 59.1, up from 58.4 in June. This expansion was supported by strong growth in new orders and output, though hiring and business sentiment were more subdued. The combined Composite PMI, which includes both services and manufacturing data, climbed to 61.1 in July, the fastest expansion rate since April 2024.

Key Highlights

• Services PMI: 60.5 in July, highest in 11 months
• Export Growth: Orders from Asia, Europe, the US, Canada, and the UAE
• Employment: Weakest hiring rate in over a year
• Manufacturing PMI: Climbed to 59.1, a 16-month high
• Composite PMI: Rose to 61.1, fastest since April 2024
• Cost Pressures: Rise in food, freight, and labour costs
• Outlook: Future Output Index at its lowest since March 2023

Future Outlook

Despite the strong performance in both services and manufacturing sectors, the Future Output Index-a gauge of business expectations for the next 12 months-fell to its lowest level since March 2023. This signals growing caution among firms. Several companies cited concerns over inflation, global economic uncertainties, and rising operating costs, which could dampen future expansion.

Although the current demand environment remains favourable, particularly for exports, sustained cost pressures and subdued hiring trends may weigh on long-term growth. Analysts note that the divergence between robust output and weak job creation suggests companies are focusing on efficiency gains rather than workforce expansion.

Going forward, the services and manufacturing sectors may remain in expansionary territory, but the pace could slow if input cost inflation persists or if global demand weakens. Continued policy support, monetary stability, and easing supply-side constraints will be crucial to maintain the growth momentum in the coming months.

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