India's services sector PMI saw a sharp contraction in activity with the HSBC Services PMI down from 51.7 in June to 47.9 in July. The seasonally adjusted HSBC Services Business Activity Index registered below the 50.0 no-change mark for the first time since October 2011 and was consistent with a moderate contraction. Sector data indicated that the Transport & Storage and Renting & Business Activities sub-sectors were the main drivers of the overall decline.

"July data highlighted the first decline in business activity across the Indian private sector in over four years. Manufacturers and service providers both recorded lower output levels, amid evidence of falling new business and a difficult economic climate. At 48.4 in July, down from 50.9 in June, the HSBC India Composite Output Index was indicative of a moderate contraction overall," a release from HSBC PMI has stated.

New orders received by private sector companies in India fell in July, amid reports of an increasingly fragile economy. Despite being moderate, the latest contraction was the first recorded since April 2009. Manufacturing and services companies both signalled lower volumes of incoming new work, with the rate of contraction faster in services.

"Nevertheless, backlogs of work across the Indian private sector rose in July. Manufacturing companies indicated that unfinished business levels were accumulated as a result of powercuts and raw material shortages at suppliers, while service providers commented on delayed payment from clientts," the HSBC Services PMI release has stated.

Commenting on the India Services PMI survey, Leif Eskesen, Chief Economist for India & ASEAN at HSBC said: "Activity in the service sector contracted in July led by a drop in new business, which also led to a decline in optimism among the surveyed companies. Meanwhile, inflation gauges softened on the back of weaker demand and tough competition. While the RBI has to cater to the currency at the moment, it will eventually need to cater more to growth as economic activity continues to soften."

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