India private sector growth slows to three-month low as demand weakens

India’s private sector lost momentum in June as weaker demand, softer hiring and fading confidence took some shine off one of the world’s strongest growth stories. HSBC’s flash composite purchasing managers’ index, compiled by S&P Global, fell to 57.4 from 59.3 in May, its weakest reading since March, even as it stayed well above the 50 mark that separates expansion from contraction.

The slowdown was broad enough to matter. Overall new orders grew at the slowest pace since March, while businesses pointed to competitive pressure and gas shortages as obstacles to winning work. The services index slipped to 57.3, a 17-month low, and manufacturing eased to 54.5, a three-month low, showing that weaker momentum was not confined to a single part of the economy.

Export demand remained uneven. Service companies reported slightly faster growth in international sales, but manufacturers recorded their weakest rise in new export orders since March 2023. That matters for an economy that has leaned heavily on domestic consumption and a resilient trade backdrop to keep its expansion ahead of many large peers.

Employment data added to the cautious tone. Private-sector hiring increased only marginally in June, the weakest gain in the current six-month expansion, with both factories and service providers posting their smallest increases in hiring since December. If that pattern persists, it could filter into household spending and slow the kind of job-driven demand that has helped support Indian growth.

Price pressures, meanwhile, eased. Input costs fell to a three-month low and selling price inflation cooled to its weakest pace in six months as firms became less willing to pass higher costs on to customers. Business confidence also weakened, falling below its long-run average, while sentiment among goods producers slipped to its weakest level in nearly four years.

Pranjul Bhandari, HSBC’s chief India economist, said the moderation reflected softer manufacturing output after inventory-building lost steam, even as new export orders stayed resilient and the order-to-inventory ratio improved. The flash reading, based on around 90% of survey responses, is an early guide to the final monthly PMI and could still be revised slightly. But the message from June was clear: India is still growing at a solid pace, yet the latest numbers suggest a reality check for a narrative built on uninterrupted strength.