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(Bloomberg) — India’s economic activity slowed to its weakest pace in more than four years in July as renewed tensions in the Middle East weighed on demand and intensified inflationary pressures, a flash survey by HSBC Holdings Plc showed Friday.
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The services purchasing managers’ index dropped to 53.1 this month from 57.4 in June, while the manufacturing purchasing managers’ index fell to 53.9 from 54.2 in the same period. That dragged the composite index to 54.3 in July compared with 57.1 in June, the lowest reading since March 2022.
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The indexes, reflecting business confidence in the economy, are based on preliminary surveys. The data may be revised when final PMI figures are released next week. A reading above 50 indicates expansion in economic activity, while a print below that indicates contraction.
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Risks to India’s economic outlook have increased as a truce between the US and Iran remains elusive, raising the prospect of prolonged geopolitical tensions and higher energy prices. The Reserve Bank of India said this week that while high-frequency indicators point to resilient demand, renewed uncertainty in the Middle East and deficient monsoon rains remain key threats to growth.
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With oil prices climbing again, sustained gains could inflate India’s fuel import bill, putting pressure on the rupee and adding to imported inflation for the world’s third-largest oil importer.
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Firms are increasing inventories and other buffers to guard against persistent supply disruptions stemming from renewed geopolitical tensions, Pranjul Bhandari, chief India economist at HSBC said in a statement.
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The moderation in growth was centered on the services economy, where expansions in new orders and output eased to their weakest in 53 months, while the manufacturing sector recovered some momentum, the survey showed.
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That meant businesses raised output prices at a faster pace in an effort to protect margins, Bhandari said.
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