Index of Services Production (ISP)

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The Ministry of Statistics and Programme Implementation (MoSPI) is set to launch the Index of Services Production (ISP) in July 2026. It will serve as India's first monthly high-frequency indicator to measure the performance of the services sector, functioning as the counterpart to the Index of Industrial Production (IIP) for the industrial sector.

What is the Index of Services Production (ISP)?

• The Index of Services Production (ISP) is a monthly macroeconomic indicator developed by MoSPI to measure short-term changes in the real (inflation-adjusted) output of India's formal services sector.

• It is designed to provide timely information on the performance of services, similar to how the Index of Industrial Production (IIP) tracks industrial output.

• The index has been developed by a Technical Advisory Committee (TAC) chaired by Debjani Ghosh, and it will initially be released on a trial basis with sector-wise indices before becoming a regular monthly publication.

Why is the ISP Needed?

• The need for the ISP has emerged because the services sector contributes more than 50% of India's Gross Value Added (GVA) since 2013-14, yet India has lacked a monthly high-frequency indicator to monitor its real growth.

• The ISP fills this gap by providing timely and reliable estimates of services sector activity. It will strengthen economic monitoring, improve policy formulation, support macroeconomic forecasting, and complement the IIP to present a more comprehensive picture of the Indian economy.

• The development of the ISP has become possible due to the availability of high-frequency GST data and the launch of the Annual Survey of Incorporated Services Sector Enterprises (ASISSE), which provide reliable and consistent information on service-sector activities.

Coverage and Scope of ISP

The ISP measures only the formal services sector of the economy.

It excludes non-market government activities, public administration and defence, government-run health and education services, personal services, gambling, and the informal sector, as these activities either lack measurable market output or do not generate comparable production data.

Methodology of ISP

• The ISP is compiled using a Fixed-Weight Laspeyres Volume Index, with 2024–25 adopted as the base year, aligning it with the rebased Consumer Price Index (CPI).

• The index assigns Gross Value Added (GVA)-based weights to different service sectors according to their contribution to the economy. This ensures that sectors with higher economic importance receive proportionately greater weight in the index.

• The ISP measures the volume of services produced rather than merely recording changes in revenue. It converts nominal turnover into real output by removing the effects of inflation through the use of price deflators.

Major Data Sources

• The ISP relies on multiple administrative and survey-based databases.

• For sectors such as air transport, railways, banking, and insurance, the index uses administrative and secondary data.

• For sectors including trade, transport, telecommunications, accommodation, real estate, professional services, and arts & recreation, the ISP primarily uses GST outward supply data, which captures business turnover on a regular basis.

• For private health and education services, the index uses data from the Annual Survey of Incorporated Services Sector Enterprises (ASISSE).

Output Measurement

• The ISP uses both quantity-based and value-based indicators depending on the nature of the service.

• For sectors such as air transport and railways, production is measured using physical indicators like passenger-kilometres and freight movement.

• Most other service sectors are measured using turnover, sales, or GST-based value indicators, which are adjusted for inflation to estimate real output.

• Because services are generally consumed immediately after production, deflated turnover is considered the most appropriate measure of output.

Deflators Used in ISP

• To estimate real growth, the ISP removes the effect of inflation by applying different price indices.

• The Wholesale Price Index (WPI) is used for wholesale trade, while sector-specific Consumer Price Indices (CPI) are applied wherever available.

• For banking and insurance, CPI-General serves as the deflator, whereas CPI Non-Food is used for most other services.

• In the absence of a comprehensive Service Producer Price Index (SPPI), CPI Non-Food acts as a proxy because over 80% of non-food inflation is closely linked with services or their cost components, such as transport, housing, and energy.

Trial Phase and Release Schedule

MoSPI will initially publish experimental or trial indices covering 2025–26 and April 2026 beginning in July 2026.

During this trial phase, the methodology will be tested and refined before the ISP transitions into a regular monthly publication with a 60-day time lag, similar to other major macroeconomic indicators.

Significance of ISP

The introduction of the ISP represents a major improvement in India's statistical framework by creating a dedicated high-frequency indicator for the country's largest economic sector.

It will enable policymakers to monitor economic activity more accurately, strengthen real-time economic assessment, improve forecasting, support evidence-based policymaking, and provide investors, businesses, and researchers with timely information on the performance of India's rapidly expanding services economy.