India’s private sector growth hits 4-year low in July 2026

India’s private sector growth slowed to its weakest level in more than four years in July, as a sharp slowdown in the services sector weighed on overall business activity despite resilient manufacturing output, rising export orders, and continued hiring. According to the HSBC Flash India Composite Purchasing Managers’ Index (PMI), compiled by S&P Global, the composite PMI fell to 54.3 in July from 57.1 in June, remaining above the 50-point threshold that separates expansion from contraction but signaling a significant loss of momentum.

The weaker reading came as services activity cooled amid softer demand, order cancellations, and fewer client enquiries, while manufacturers continued to benefit from strong overseas demand. Although businesses remained optimistic about future growth and expanded hiring for a seventh consecutive month, rising input costs and slowing domestic demand highlighted growing challenges for India’s private sector.

Composite PMI Falls to Four-Year Low

The latest flash PMI survey showed India’s private sector expanded at its slowest pace since early 2022.

July PMI Snapshot

Indicator	July 2026	June 2026
HSBC Flash Composite PMI	54.3	57.1
Services PMI	53.1	57.4
Manufacturing PMI	53.9	54.2
Expansion Threshold	Above 50	Above 50

Although the composite index remained comfortably above 50, indicating continued expansion, the decline points to a notable moderation in overall economic activity.

Services Sector Loses Momentum

The services industry, which has been the primary engine of India’s economic growth in recent years, experienced the sharpest slowdown.

According to the survey, weaker performance was driven by:

• Challenging market conditions.
• Order cancellations.
• Reduced client enquiries.
• Softer domestic demand.

The Services Business Activity Index fell to 53.1, its weakest reading since February 2022, reflecting slower growth across service-oriented businesses.

Manufacturing Remains Resilient

While services weakened, India’s manufacturing sector continued to expand, although at a slightly slower pace.

Key observations included:

• Manufacturing PMI eased to 53.9 from 54.2.
• Factory output continued to grow.
• New orders remained positive.
• Export demand supported production activity.

Manufacturers benefited from stronger international demand, helping cushion the broader slowdown in private sector activity.

Sector Performance Comparison

Sector	Trend
Services	Growth slowed sharply
Manufacturing	Moderate expansion continued
Export Orders	Fastest growth since March
Employment	Hiring increased for seventh straight month

Export Demand Provides Support

One of the brighter aspects of the survey was continued strength in overseas demand.

International sales expanded at their fastest pace since March, helping manufacturers offset weaker domestic conditions.

Businesses also continued hiring employees in anticipation that demand would remain healthy in the coming months, suggesting companies still expect medium-term growth despite the softer July data.

Rising Costs Continue to Pressure Businesses

Companies reported another increase in input costs during July.

Cost pressures were driven by:

• Higher fuel prices.
• Rising labour expenses.
• Increased material costs.
• More expensive transportation.

Many firms passed part of these higher costs on to customers, resulting in output price inflation reaching a three-month high.

Why It Matters

The latest PMI data suggests that India’s exceptionally strong private sector momentum is beginning to moderate after an extended period of robust expansion. While the economy continues to grow, the slowdown in the services sector raises concerns because services have been the primary contributor to India’s recent economic performance. Manufacturing remains resilient and export demand has strengthened, but these factors have not fully compensated for weaker domestic business activity.

At the same time, continued hiring and stronger export orders indicate that businesses remain cautiously optimistic about future demand. However, persistent cost pressures from fuel, labour, transportation, and raw materials could continue to weigh on profitability and consumer demand if inflation remains elevated. The PMI survey will be closely watched by investors and policymakers for signs of whether July’s slowdown represents a temporary soft patch or the beginning of a broader moderation in economic growth.

Looking Ahead

India’s economic outlook will depend on whether domestic demand recovers in the coming months while export momentum remains strong. Policymakers and financial markets will closely monitor future PMI releases, inflation trends, and global economic conditions to assess whether business activity regains pace. Continued strength in manufacturing and exports could help stabilize overall growth, but a sustained recovery in the services sector will likely be essential for restoring the stronger expansion seen over the past two years.

Looking ahead, businesses are expected to remain focused on managing rising input costs while investing in capacity and hiring where demand supports expansion. If inflation eases and domestic consumption strengthens, India’s private sector could regain momentum later in the fiscal year. However, ongoing global uncertainties and cost pressures remain key risks to the growth outlook.