India's Private Sector Growth Stays Strong in July: HSBC PMI

In contrast, manufacturing output improved, with the Manufacturing PMI Output Index rising to 57.0 from 56.3 in the previous month, although the headline Manufacturing PMI edged down to 53.9 from 54.2.

According to the data, growth in output and new business softened amid increasingly challenging market conditions, competitive pressures, order cancellations, fewer client enquiries and shortages of key raw materials.

Despite the moderation in domestic demand, export orders continued to strengthen, with the pace of growth accelerating across both manufacturing and services firms. At the composite level, international sales expanded at the fastest pace since March.

"The renewed tensions in the Middle East have once again resulted in firms building buffers to manage the uncertainties around the longevity of the supply-side shock. Finished goods and input inventories increased alongside a pick-up in purchasing volumes," said Pranjul Bhandari, Chief India Economist at HSBC.

She further noted that manufacturing output and new export orders continued to rise, even as overall manufacturing growth eased slightly. "Price pressures firmed, with output charge inflation gathering pace and signalling a renewed push to protect margins," Bhandari added.

Employment in the private sector continued to expand for the seventh consecutive month, although the pace of hiring remained modest. Services firms led job creation, while manufacturers continued to report an increase in unfinished work.

Meanwhile, business confidence eased to a six-month low in July. While optimism improved among manufacturers, sentiment weakened in the services sector, with firms citing expectations of better market conditions and stronger demand over the coming year.