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India's services sector maintained strong growth in July, supported by steady demand and robust international orders. However, the pace of job creation slipped to its lowest in over a year, reflecting cautious hiring sentiment despite business optimism, according to the latest HSBC India Services PMI report released on Tuesday.

The seasonally adjusted HSBC India Services PMI Business Activity Index stood at 60.5 in July, marginally higher than June's 60.4. The latest reading indicates a sharp and sustained increase in business activity, marking the highest rate of expansion in nearly a year.

HSBC noted, "At 60.5 in July, the seasonally adjusted HSBC India Services PMI Business Activity Index - based on a single question asking how the level of business activity compares with the situation the month before - was little-changed from 60.4 in June and therefore signalled another sharp increase in output.... July's increase in employment was the slowest in 15 months, despite strengthening business confidence."

Hiring Slows Despite Positive Outlook

Despite the ongoing expansion, the pace of employment growth in the services sector softened notably. "July's increase in employment was the slowest in 15 months, despite strengthening business confidence," the report added. Less than 2 per cent of the surveyed firms hired new employees, while most kept their workforce unchanged from June.

Broad-Based Demand Boosts New Orders, Global Sales

New business inflows rose, supported by consistent demand from both domestic and international markets. Service providers cited fresh orders from Asia, Canada, Europe, the UAE, and the US. Notably, the growth in external sales was the second-highest in a year, trailing only May.

Among the sectors, Finance and Insurance led the expansion in both activity and incoming orders. In contrast, Real Estate and Business Services witnessed the slowest growth.

Cost Pressures Intensify, Confidence Shows Signs Of Easing

The report pointed to growing inflationary pressures, with both input costs and output prices rising at a quicker pace. Output price inflation surpassed the long-term average, reflecting the pass-through of higher operating expenses.

While overall business sentiment remained upbeat, some firms were less confident about future growth. The Future Output Index dipped to its lowest since March 2023, indicating a degree of uncertainty in long-term planning.

The HSBC India Composite PMI Output Index, which combines data from both manufacturing and services sectors, rose marginally from 61.0 in June to 61.1 in July—signalling the strongest private sector growth since April 2024. However, despite this momentum, the weakest job creation in 15 months was recorded across the private sector, aligned with subdued hiring expectations.