India’s services sector expanded at its slowest pace in more than four years in July as weaker client demand, intense competition and fading business confidence weighed on activity, adding to signs that momentum across the country’s private sector is easing even as inflation remains contained ahead of the Reserve Bank of India’s policy decision.

The latest survey comes after manufacturing activity also slowed to a near five-year low in July, supporting evidence that Asia’s third-largest economy is experiencing a broad moderation in growth following a prolonged period of strong expansion.

According to the S&P Global HSBC India Services Purchasing Managers’ Index (PMI), compiled by S&P Global, the index fell sharply to 53.3 in July from 57.4 in June. Although the reading remained above the 50-point threshold separating expansion from contraction, it marked the weakest pace of growth since early 2022 and came in slightly above the preliminary estimate of 53.1.

The slowdown was driven primarily by softer demand, with new business expanding at its weakest pace in nearly four-and-a-half years.

Companies cited heightened competition and reduced customer spending as key factors weighing on sales growth. While international demand remained supportive, export orders also moderated from the previous month, although they continued to outperform overall domestic demand.

The combination suggests that external markets are providing some cushion for service providers, but are no longer strong enough to offset weakening conditions at home.

Business confidence also deteriorated further, falling to a seven-month low and marking the fourth consecutive monthly decline. Firms remained optimistic that stronger demand, tourism and new business opportunities would support activity over the coming year, but sentiment has become increasingly cautious amid slowing order growth.

Employment continued to expand for a seventh consecutive month, although hiring remained subdued.

Job creation improved modestly from June’s six-month low, but most companies reported no change in staffing levels, with only a small proportion adding workers. The softer labour market trend mirrors slowing demand and suggests businesses are becoming more cautious about expanding payrolls until growth improves.

Cost pressures eased further during July, providing some relief for businesses. Input cost inflation slowed for a fourth straight month to its lowest level since January, helped by moderating price increases across key inputs.

However, companies continued to raise prices charged to customers, with selling price inflation accelerating to a three-month high as firms passed part of their remaining cost increases on to clients.

Even so, inflationary pressures remain considerably more contained than in many other major economies, giving the Reserve Bank of India greater flexibility in setting monetary policy.

But the weakness in services added to slowing manufacturing activity, pushing India’s Composite PMI, which combines both sectors, down to 54.3 in July from 57.1 in June.

The reading was the weakest since March 2022, pointing to a broad-based moderation across the private sector rather than weakness confined to a single industry.

The latest PMI data spur the belief that India’s economic growth is cooling after several years of robust expansion, although activity continues to remain comfortably in expansion territory.

The survey comes just ahead of the Reserve Bank of India’s monetary policy decision, where economists overwhelmingly expect policymakers to leave interest rates unchanged while adopting a more cautious tone as inflation risks from higher oil prices remain under close watch.

SEBI Stands By New Closing Auction Despite Market Volatility

Separately, India’s market regulator signaled it has no immediate plans to review the country’s newly introduced stock closing auction mechanism after sharp swings in derivatives markets sparked criticism from traders.

According to a source with direct knowledge of the matter who spoke to Reuters, the Securities and Exchange Board of India (SEBI) believes it is too early to assess the effectiveness of the system, which was introduced on Monday to determine official closing prices for listed stocks.

The new mechanism contributed to significant volatility earlier this week, particularly on Tuesday when weekly derivatives contracts expired. Futures and options prices experienced unusually sharp movements, producing unexpected losses for some traders while creating substantial gains for others.

Arbitrage funds emerged among the biggest beneficiaries, recording sizeable one-day mark-to-market valuation gains as pricing dislocations opened temporary trading opportunities. Despite complaints from market participants that the system was not functioning as intended, the regulator expects trading conditions to normalize as participation increases.

The source said SEBI has encouraged brokers to broaden retail investor participation in the closing auction and does not have a specific timetable for reviewing the framework.

Overall, the latest PMI surveys suggest India’s economy is entering a period of slower, but still positive, growth as both manufacturing and services lose momentum simultaneously.

While easing inflation provides policymakers with room to keep interest rates unchanged for now, softer demand, weaker business confidence and slower job creation indicate that the economy is becoming more sensitive to higher global energy prices and persistent external uncertainty.

At the same time, SEBI’s decision to stand by its new market-closing mechanism signals that regulators remain focused on improving market structure despite initial volatility, betting that greater participation and increased liquidity will help stabilize price discovery over time.

Samsung Electronics and SK Hynix have been evaluating semiconductor manufacturing equipment from China’s Advanced Micro-Fabrication Equipment (AMEC) for potential use at their Chinese production facilities, Reuters reports, citing people familiar with the matter.

The evaluations, which began roughly two years ago, are part of contingency planning by the world’s two largest memory chipmakers as they seek to reduce operational risks should Washington impose further restrictions on Western semiconductor equipment entering China.

While neither company has approved broader deployment of AMEC’s tools, the trials represent an important milestone for China’s semiconductor equipment industry, offering one of its leading manufacturers a rare opportunity to gain validation from global memory chip leaders.

The development also marks an unintended consequence of U.S. technology restrictions: measures designed to curb China’s semiconductor ambitions are simultaneously creating openings for Chinese equipment makers to displace Western suppliers inside foreign-owned fabrication plants operating in China.

However, Samsung told Reuters it has not tested AMEC equipment for use at its factory in China and has not considered doing so.

SK Hynix declined to comment.

Export Control Uncertainty Drives Contingency Planning

According to the sources, the chipmakers began assessing Chinese equipment as uncertainty grew over whether the United States would continue allowing them to import American chipmaking tools into China.

Washington designated Samsung’s and SK Hynix’s Chinese operations as Validated End Users (VEU) in 2023, allowing them to receive certain controlled U.S. semiconductor equipment without applying for individual export licenses. That arrangement changed in 2025 when the United States revoked the VEU designation before later granting both companies annual licenses covering equipment shipments into their Chinese facilities for 2026.

Although the licenses currently permit continued operations, executives remain concerned that future restrictions could become significantly broader. Rather than targeting only new equipment sales, future U.S. measures could also limit servicing, repairs, software upgrades or replacement parts for Western tools already installed inside Chinese fabs, the sources said.

As a result, Samsung and SK Hynix are evaluating Chinese suppliers primarily as a safeguard to maintain existing production lines if access to Western equipment becomes more restricted, rather than as a means of expanding manufacturing capacity in China.

China’s Growing Equipment Capabilities

The evaluations underscore the rapid progress made by Chinese semiconductor equipment manufacturers in narrowing the technology gap with established global competitors.

While Chinese companies remain behind international leaders in advanced lithography and certain inspection technologies, they have become competitive in other areas including:

• Etching
• Deposition
• Cleaning
• Chemical mechanical planarization (CMP)

According to Dan Hutcheson, Vice Chairman of research firm TechInsights, Chinese equipment is often priced 20% to 30% below comparable products offered by Western manufacturers, making it increasingly attractive for customers seeking lower costs alongside supply-chain diversification.

AMEC’s etching systems are already deployed by leading Chinese memory producer Yangtze Memory Technologies (YMTC), providing additional confidence that some of its technology has reached commercial maturity.

Western Suppliers Face Emerging Competition

Samsung’s NAND flash memory plant in Xi’an and SK Hynix’s NAND and DRAM facilities in Dalian and Wuxi currently rely heavily on equipment supplied by U.S. companies including Applied Materials and Lam Research.

A successful qualification by either Korean manufacturer would represent a significant commercial endorsement for AMEC and could eventually increase competitive pressure on established global equipment makers, including Applied Materials, Lam Research and KLA, as well as Japanese and European rivals.

China remains one of the industry’s largest markets. Applied Materials generated $8.53 billion in revenue from China during fiscal 2025, representing approximately 30% of its global sales.

Even if Chinese equipment receives technical approval, however, replacing entrenched Western suppliers would likely take years because semiconductor manufacturing tools undergo extensive qualification procedures before entering production.

Other obstacles include smaller service networks, intellectual property concerns and potential geopolitical pressure from Washington discouraging adoption of Chinese technology.

The sources also noted that it remains unlikely Samsung or SK Hynix would install Chinese equipment at fabrication facilities in South Korea because of security and intellectual property considerations.

The broader trend nevertheless reflects China’s accelerating progress toward semiconductor self-sufficiency.

According to Deutsche Bank estimates, Chinese equipment manufacturers including Naura Technology, AMEC, Piotech and ACM Research are each expected to generate more than $1 billion in revenue during 2026.

Collectively, those companies could capture 25% to 30% of China’s projected $28 billion wafer fabrication equipment market this year. Excluding lithography and metrology equipment, Chinese manufacturers’ market share could approach 40%, highlighting the rapid expansion of domestic suppliers in segments where technological barriers are lower.

However, the evaluations demonstrate how geopolitical tensions are fundamentally reshaping procurement strategies across the semiconductor industry. Rather than relying exclusively on established Western suppliers, multinational chipmakers operating in China are now exploring domestic alternatives as insurance against future export restrictions.

Customs filing shows more than half of invalidated tariff collections have been returned to importers, although some critics believe consumers have yet to benefit

The Trump administration has refunded approximately $100 billion in tariffs that were collected before the U.S. Supreme Court invalidated a large portion of President Donald Trump’s trade duties earlier this year, according to a court filing, marking one of the largest repayments of tariff revenue in U.S. history.

The disclosure, contained in a filing submitted Tuesday to the U.S. Court of International Trade by U.S. Customs and Border Protection officials, provides the clearest picture yet of the government’s efforts to unwind tariffs that the nation’s highest court ruled had been imposed without proper legal authority.

According to the filing, “refunds (duties plus interest) of approximately $100 billion have been completed using the Consolidated Administration and Processing of Entries Refund component, certified by the agency, and sent to the U.S. Department of Treasury for disbursement.”

The figure came from refunds processed through the end of July and represents more than half of the approximately $166 billion in tariff revenue invalidated by the Supreme Court’s February ruling. The repayments include both the original duties collected and accrued interest, with the money being returned primarily to businesses that imported goods subject to the tariffs.

The refunds stem from the Supreme Court’s landmark February 20 decision striking down most of Trump’s broad tariffs imposed under the International Emergency Economic Powers Act (IEEPA).

The court concluded that the decades-old emergency powers law does not authorize a president to unilaterally impose sweeping tariffs on imports from U.S. trading partners, curbing one of the administration’s principal trade policy tools.

The ruling marked a significant constitutional and legal setback for the White House, limiting the scope of executive authority in trade policy and reinforcing Congress’ central role in setting tariffs.

The decision affected roughly $166 billion in tariffs collected under the IEEPA framework, triggering an extensive refund process administered by Customs and the Treasury Department.

Tariffs have remained a defining feature of Trump’s economic agenda throughout his presidency. The administration has argued that higher import duties protect domestic manufacturers, encourage companies to relocate production to the United States, and provide leverage in trade negotiations with foreign governments.

However, the administration’s approach has faced sustained legal challenges from businesses, trade groups and state governments, many of whom argued that the president exceeded statutory authority by invoking emergency powers to impose broad-based tariffs.

The latest court filing illustrates the substantial financial consequences of the Supreme Court’s ruling, with federal agencies now tasked with returning tens of billions of dollars already collected. While businesses that paid the tariffs are receiving the refunds, critics argue that the repayments do not compensate American households that ultimately absorbed much of the higher cost through increased prices on imported goods.

“Trump is sending the ‘refunds’ to the companies, not working people. Every single cent of these refunds should go back to American consumers,” Democratic Representative Greg Casar said this week.

Economists have long debated who ultimately bears the cost of tariffs. Although importers pay the duties at the border, many companies pass some or all of those costs through supply chains to wholesalers, retailers and ultimately consumers in the form of higher prices.

As a result, consumer advocates argue that businesses receiving refunds may already have recovered much of the tariff expense by raising prices during the period the duties were in effect.

The Supreme Court’s decision has not ended Trump’s use of tariffs.

Following the ruling, the president sharply criticized the justices, describing them as “disloyal,” and quickly introduced a temporary 10% tariff on imports under a different statutory authority that, like the IEEPA, had not previously been used by any president to impose broad tariffs.

The administration subsequently expanded its trade measures by invoking Section 301 of the Trade Act of 1974, a long-established legal mechanism that authorizes the United States to respond to unfair or discriminatory trade practices by foreign countries.

Unlike the emergency powers statute rejected by the Supreme Court, Section 301 has been used by successive administrations to impose tariffs following investigations into foreign trade practices, making it a more established legal foundation for trade enforcement.

The administration has noted that the revised tariff framework complies with existing law while preserving its broader strategy of using import duties to address trade imbalances, protect domestic industries and encourage manufacturing investment in the United States.

While the government has already returned about $100 billion, roughly $66 billion in invalidated tariff collections remains to be refunded, suggesting the unwinding of the Supreme Court’s decision will continue for months.

India’s foreign exchange reserves climbed to a near three-month high at the end of July, strengthening the Reserve Bank of India’s (RBI) ability to shield the rupee from external shocks, but economists expect the currency to remain largely range-bound as the central bank continues to manage sizable dollar obligations accumulated from previous market interventions.

Data released by the RBI on Wednesday showed foreign exchange reserves rose by nearly $10.5 billion to $692.9 billion in the week ended July 31, marking the largest weekly increase since late January.

The jump reflects the success of the central bank’s foreign-currency deposit initiative launched in June, which was designed to shore up India’s external buffers as oil price volatility linked to the U.S.-Israeli conflict with Iran heightened risks to the country’s balance of payments and currency stability.

The RBI has so far received $36.7 billion through Foreign Currency Non-Resident (FCNR) deposits mobilized by banks under the special scheme through July 31. The facility allows banks to swap those foreign-currency deposits with the RBI under a zero-cost hedging arrangement that remains open until the end of September.

The stronger reserve position provides the central bank with greater firepower to smooth excessive volatility in the rupee, which has faced pressure this year from elevated crude oil prices, capital flow swings and geopolitical uncertainty affecting global financial markets.

“India’s foreign exchange reserves continue to be adequate in terms of the standard metrics of reserve adequacy with import cover of over 10 months and external debt cover of 90.8%,” RBI Governor Sanjay Malhotra said while presenting the central bank’s monetary policy decision in Mumbai.

The RBI left its benchmark repo rate unchanged at 5.25% on Wednesday, a widely anticipated decision that underscored the central bank’s preference to preserve policy flexibility while monitoring inflation and global risks.

The reserve build-up coincided with a sharp appreciation in the rupee. During the week covered by the data, the currency gained 1.2% against the U.S. dollar to close at 95.38, its strongest weekly advance in four months.

However, analysts caution that stronger reserves do not necessarily translate into sustained currency appreciation.

A Reuters poll of 36 foreign exchange strategists found broad consensus that the rupee will remain largely stable over the coming months before weakening modestly over the next year.

The median forecast projects the currency at 95.25 per dollar in three months and at the end of January 2027, before easing to 95.95 in twelve months.

The relatively subdued outlook reflects expectations that much of the incoming foreign capital will be used to offset the RBI’s sizeable forward dollar commitments rather than support a stronger exchange rate.

“Inflows will be enough to fund the RBI’s requirements rather than be used for currency appreciation. I expect more sideways movement for the rupee rather than any upside,” said Anitha Rangan, chief economist at RBL Bank.

Dhaval Shah, founder and managing director of De-Risk Forex Consultancy, said the FCNR mobilization has materially strengthened India’s external position and could push reserves above another major milestone.

“As flows from the FCNR scheme have gained pace, we expect the headline FX reserve figure to cross $700 billion in coming weeks, and it will also help the RBI to reduce its short FX book,” Shah said.

“The bigger picture will continue to favor rupee appreciation.”

Economists estimate the RBI’s June measures could ultimately attract around $50 billion in foreign currency by year-end, further boosting India’s external buffers.

Nevertheless, analysts say the central bank’s sizeable forward dollar book, estimated at more than $100 billion as of June, will likely absorb much of those inflows, limiting their impact on the exchange rate.

The forward positions stem from previous interventions aimed at smoothing volatility in the foreign exchange market. As those contracts mature, the RBI will need dollar inflows to meet its obligations, reducing the scope for reserves to translate directly into a stronger rupee.

Unlike several emerging-market central banks that have raised interest rates to defend their currencies against imported inflation, the RBI has so far avoided using monetary policy as an exchange-rate tool, instead relying primarily on its substantial reserve stockpile and targeted market intervention to maintain orderly currency movements.

However, the latest reserve increase bolsters India’s position among countries with the world’s largest foreign exchange buffers, providing policymakers with greater flexibility to manage external shocks even as higher oil prices, geopolitical tensions and global monetary uncertainty continue to cloud the outlook for emerging-market currencies.