Blitz India Business
NEW DELHI: India’s private sector is still growing. The rate at which it is growing has stepped down sharply, and the composition of the slowdown points squarely at services rather than factories. The flash HSBC India Composite Purchasing Managers’ Index, compiled by S&P Global, fell to 54.3 in July from 57.1 in June — still comfortably above the 50 mark that separates expansion from contraction, but the weakest reading since March 2022.
The split between the two halves of the survey is where the useful information sits. The flash manufacturing PMI edged down only marginally, to 53.9 from 54.2, while the manufacturing output index actually rose, to 57.0 from 56.3. The services business activity index, by contrast, fell to 53.1 from 57.4 — a 53-month low, and the entire explanation for the composite’s step down.
Factories held, services stepped down: the manufacturing output index rose to 57.0 in July while services activity fell to a 53-month low of 53.1.
A four-year low that is still four points above the expansion threshold is a deceleration, not a downturn. The two are routinely confused in the same sentence.
At a Glance
• Flash composite PMI, July: 54.3, down from 57.1 in June
• Significance: weakest composite reading since March 2022
• Flash manufacturing PMI: 53.9, from 54.2
• Manufacturing output index: 57.0, up from 56.3
• Services business activity index: 53.1, from 57.4 — a 53-month low
• Threshold: readings above 50 indicate expansion
• Compiler: S&P Global, for HSBC; flash estimates precede the final monthly release
• Policy context: the RBI meets August 3–5 with the repo rate at 5.25% and a neutral stance
Two cautions apply before this is read as a turning point. Flash estimates are based on a partial sample and are revised when the full month’s responses arrive, so the final print may differ. And PMIs are diffusion indices — they measure the proportion of firms reporting improvement, not the size of the improvement — which means a fall from 57.1 to 54.3 says that fewer businesses are reporting growth than in June, not that output has fallen. The manufacturing output sub-index rising while the headline manufacturing PMI slipped is a textbook illustration of that distinction, and it argues that goods production was, if anything, firmer in July than in June.
Read with the rest of the week’s data, the picture is coherent rather than contradictory. Manufacturing is being supported by exactly the demand the other releases describe: record electronics exports, a June-quarter capital spending increase of about 24%, and core-sector output at a five-month high. Services, which are far more sensitive to domestic consumption and to sentiment, have decelerated from an unusually strong June base of 57.4 — and a fall from an exceptional level to a good one is not the same event as a fall to a weak one. For the Monetary Policy Committee meeting from August 3, the combination of resilient goods output, decelerating services and an inflation projection already revised up to 5.1% for FY27 supports patience rather than urgency in either direction. The constructive read for businesses is that the expansion has not stopped; it has become more selective, and the sectors where it is holding are the ones connected to exports and to public capital spending.