India’s services sector, long the engine room of the country’s economic expansion, just downshifted in a meaningful way. The HSBC India Services PMI, compiled by S&P Global, fell to 53.3 in July from 57.4 in June. That’s still above the 50-line that separates expansion from contraction, but it’s the weakest reading since February 2022.

What the numbers actually say

The slowdown wasn’t confined to services. The HSBC Flash India Composite PMI Output Index, which combines both services and manufacturing, slid to 54.3 in July from 57.1 in June. That’s the lowest composite reading since March 2022.

Manufacturing wasn’t spared either. The Manufacturing PMI eased to 53.5 from 54.2, its weakest level since August 2021.

The core driver behind the services slump was softer domestic demand. New business inflows grew at their weakest pace since February 2022, with companies citing increasing competitive pressures and fewer new enquiries from domestic clients.

New export orders actually accelerated during July, with stronger demand flowing in from international markets including the UAE, UK, and the US. Employment in the services sector showed modest improvement. Input cost inflation also began to ease, but output price inflation rose at the same time, suggesting businesses were passing along costs even as demand softened. Business confidence dropped to a seven-month low.

The data collection period for the July readings ran primarily from July 8 through July 27.

What this means for investors and crypto markets

The counterargument is worth noting. Stronger export orders from the US, UK, and UAE suggest that India’s external sector is holding up, which could cushion the blow from domestic weakness.

The key metric to watch going forward is whether the services PMI stabilizes around current levels or continues its descent. A reading in the low 50s suggests growth is still present but fading. A drop below 50 would signal outright contraction.