India’s services PMI slips to 17-month low in June as domestic demand weakens

India's services sector expanded at a slower pace in June as softer domestic demand, weakening client interest, and stagnant hiring weighed on business activity, according to the latest HSBC India Services Purchasing Managers' Index (PMI) survey released on Friday. 

The seasonally adjusted HSBC India Services PMI Business Activity Index fell to 57.4 in June from 59.8 in May. While the reading remained well above the 50-point threshold that separates expansion from contraction, it marked the weakest growth in services activity in 17 months. 

The slowdown was largely driven by the weakest increase in new business inflows in more than two-and-a-half years. Survey participants cited competitive pricing, stronger e-commerce demand, higher customer bookings and improved local tourism as factors supporting sales. However, many firms also reported that difficult market conditions and softer client demand constrained overall business growth. 

Pranjul Bhandari, Chief India Economist at HSBC, said, “India’s services PMI remained in expansionary territory but eased to 57.4 in June, the lowest reading in 17 months." 

She added, “The loss of momentum pointed to more challenging market conditions and weaker demand, particularly at home. Even so, external demand held up well as overseas sales stayed robust and growth reached a three-month high." 

Employment growth was largely stagnant during the month, with service providers indicating that existing workforce levels were adequate to meet current business requirements. This followed strong hiring activity in April and May. Outstanding business volumes also remained broadly stable, with the corresponding index only marginally above the neutral 50 mark. 

The services PMI follows a similar moderation in manufacturing activity. 

According to the HSBC India Manufacturing PMI released on Wednesday, manufacturing activity slowed in June as weaker domestic and export demand weighed on output, new orders, exports and hiring, although easing input cost pressures provided some relief to businesses. 

The seasonally adjusted HSBC India Manufacturing PMI declined to 54.2 in June from 55.0 in May. While the reading continued to signal expansion, it represented the second-weakest improvement in manufacturing activity since mid-2022, ahead only of March this year.