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India's Private Sector Growth Hits Four-Year Low as PMI Falls in July
India's private sector activity experienced its slowest expansion in over four years, with the Composite Purchasing Managers' Index (PMI) declining to 54.3 in July from 57.1 in June. Inflationary pressures and geopolitical tensions continue.
PMI Declines Amid Inflation and Geopolitical Tensions
India's private sector activity recorded its weakest growth in over four years, with the Composite Purchasing Managers' Index (PMI) falling to 54.3 in July from 57.1 in June. This deceleration, the lowest since March 2022, stemmed from muted expansions in sales and output, particularly within the services sector. Inflated input costs and resurgent hostilities in West Asia were key drivers of this slowdown, according to S&P Global.
Growth faced impediments from challenging market conditions, competitive pressures, order cancellations, and raw material shortages. New order growth in July was the weakest in close to four and a half years, prompting concerns about sustained demand. The moderation in both new orders and output was most pronounced in the service economy, where expansion rates significantly retreated to a 53-month low. The Flash Services PMI sharply fell to 53.1 in July from 57.4 in June.
Manufacturing Sector Resilience and Export Growth
In contrast to the services sector, manufacturing activity saw some recovery, with the Flash Manufacturing PMI moderating to 53.9 in July from 54.2 in June. New export orders demonstrated stronger growth, leading firms to increase hiring. Manufacturing firms also showed better performance in international sales compared to services counterparts. The composite level saw its most pronounced upturn in international sales since March.
On the pricing front, input costs and output charges rose at a faster pace in July. The aggregate rate of increase in output prices marked its fastest acceleration since April, with S&P Global noting that ongoing cost pressures fueled the upturn. Input costs across both manufacturing and services sectors intensified at a quicker rate in July, driven by fuel, labor, raw materials, and transportation expenses.
Market Conditions and Employment Trends
Renewed tensions in the Middle East led firms to build buffers against supply-side uncertainties, as noted by Pranjul Bhandari, chief India economist at HSBC. Firms maintained price discipline, with output charge inflation accelerating while signaling a renewed commitment to protecting margins. Private sector employment expanded for the seventh consecutive month in July, though the pace of job creation remained modest.
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