India's Services Sector Expands in July Amid Sluggish Job Growth

In July, India's services sector demonstrated strong growth momentum, according to the HSBC India Services PMI, which reported a slight increase to 60.5 from 60.4 in June. This marked the highest expansion rate since August 2024, signaling a robust rise in output despite a slowdown in employment growth to its weakest pace in over a year.

The HSBC report highlighted that the employment growth rate in July was the slowest in 15 months, with less than 2% of firms hiring new staff. The growth was buoyed by rising demand, including increased orders and robust external sales from regions such as Asia, Canada, and the US. Notably, Finance & Insurance led sectoral growth, while Real Estate lagged.

However, the sector faces mounting inflationary pressures, with both input costs and output charges accelerating beyond June rates. The HSBC India Composite PMI Output Index showed marginal growth from 61.0 in June to 61.1 in July, indicating strong private sector expansion. Despite this, firms have tempered their future growth expectations, as seen in the drop of the Future Output Index to its lowest point since March 2023, affecting hiring rates.

(With inputs from agencies.)