India’s Private Sector Growth Slows to Multi-Year Low in July

India’s private sector activity expanded at its slowest pace since March 2022 in July, a significant moderation driven largely by intensified inflationary pressures. This slowdown is reflected in the HSBC Flash India PMI Composite Output Index, which saw a notable decline.

Private Sector Growth Decelerates

The HSBC Flash India PMI Composite Output Index fell to 54.3 in July, down from 57.1 in June. This indicates a substantial deceleration in the pace of expansion, marking a multi-year low for overall private sector activity. The slowest expansion observed was since March 2022.

New orders also saw a pronounced deceleration, reaching their weakest growth rate in nearly four-and-a-half years. This moderation was predominantly observed within India’s service economy, where expansion rates dropped significantly from June to their lowest in 53 months, contrasting with a slight recovery in manufacturing.

Aviation Sector Faces Headwinds

Separately, ratings agency ICRA projects a modest growth trajectory for India’s domestic air passenger traffic in FY27, expecting 3-6 per cent. Despite this anticipated increase, ICRA maintains a negative outlook for the country’s aviation industry due to ongoing profitability concerns.

The agency also forecasts international passenger traffic to increase by 0-3 per cent during the fiscal year. ICRA cited broader industry challenges and continued profitability concerns as key factors influencing its negative outlook. Instability in West Asia has also played a role, contributing to increased airline operating costs and higher airfares.

These factors are expected to curb discretionary travel spending, leading to the moderation in traffic growth. Both the broad private sector and specific industries like aviation are navigating a period of significant economic moderation, with inflationary pressures and geopolitical instability shaping their immediate outlooks.