India Services Sector Growth Hits 14-Month Low Amid Rising Costs

India’s services sector experienced its slowest expansion in over a year during the latest reporting period, as businesses faced mounting inflationary pressures. The seasonally adjusted HSBC India Services Purchasing Managers’ Index (PMI) retreated to 57.7 in August, down from 60.3 in July, marking the lowest reading since June 2023.

While the index remains well above the 50-point threshold that separates expansion from contraction, the deceleration reflects a cooling in new business inflows and overall output. Service providers reported that input costs have risen, driven primarily by higher expenditures on food, labor, and transportation. Consequently, firms have increased their own selling prices to protect margins, further squeezing the competitive landscape.

Despite the cooling growth, the sector continues to benefit from robust demand, with companies maintaining a positive outlook for the coming year. Employment levels also showed resilience, as businesses continued to hire staff to manage existing workloads, though the pace of job creation moderated slightly compared to previous months. The data suggests that while India’s services economy remains in growth mode, the combination of elevated price pressures and a slight softening in demand is beginning to weigh on the sector’s momentum.