Index of Service Production: Why Index of Service Production Matters for India’s Economy

Index of Service Production Latest News

• The Ministry of Statistics and Programme Implementation (MoSPI) has released an ‘Approach Paper’ outlining its plan to measure the output of India’s formal services sector every month through a new Index of Service Production (ISP). 
• The index will use 2024-25 as the base year and will rely heavily on GST Network data as a key input. Public comments on this proposal have been invited. 
• A Technical Advisory Committee on ISP (TAC-ISP) was formed in May 2025. It consisted of 24 experts. It has prepared the current approach paper after extensive discussions.

What is the ISP and Why is it Needed

• Currently, India publishes two key high-frequency (monthly) economic indicators:
  • Index of Industrial Production (IIP) — measures monthly output of the industrial sector (manufacturing, mining, electricity).
  • Consumer Price Index (CPI) — measures retail inflation and forms the basis of India’s headline inflation number.
• Both are closely watched by policymakers, the RBI, and economists to understand the economy’s trajectory. 
• However, there is no equivalent monthly index for the services sector — a glaring gap given that services contribute more than half of India’s GDP and generate millions of jobs.

What Do Policymakers Use Currently

• To understand services sector performance, policymakers and economists currently rely on the S&P Global’s HSBC Purchasing Managers’ Index (PMI). 
• However, the PMI is a survey-based sentiment index — it captures how businesses feel about activity, not what is actually being produced. 
• It does not measure actual output. The ISP is designed to fill this gap with hard, output-based data.

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Index of Service Production (ISP)

• ISP aims to track short-term movements in the services sector. It will be similar in concept to IIP but for services.
• It will be developed by the National Statistical Office (NSO).

What Will the ISP Cover

• The approach paper studies 40+ service sub-sectors, including:
  • Trade (wholesale & retail) 
  • Transport 
  • Banking and insurance 
  • Communication 
  • Hotels and restaurants 
  • Real estate 
  • Professional and technical services 
  • Entertainment and recreation 
• Focus is on availability of output data and price deflators.

Methodology and Global Alignment

• Based on international best practices.
• Includes methods for: 
  • Data standardisation 
  • Use of price deflators (to adjust for inflation)

What Data Sources Will the ISP Use

• MoSPI plans to draw from three key data sources:
  • GST Network (GSTN) Data — Provides information on production and outward supplies across different sectors and will serve as the primary data source for monitoring services sector output. However, sectors exempt from GST — such as health and education — cannot be captured through this route.
  • Administrative Data from Ministries and Organisations — Sector-specific data from relevant government bodies will supplement GSTN data for sectors not covered by GST.
  • Annual Survey of Incorporated Services Sector Enterprises (ASISSE) — MoSPI’s own enterprise survey, currently being conducted, will provide additional granularity.
• It should be note that all three data sources exclude the informal services sector. 
• The excluded segments — due to data unavailability — account for nearly 33% of total GVA of the services sector. 
• Specifically, health and education (which will be excluded until ASISSE results are available) alone account for nearly 10% of services sector GVA.

How Will Output be Adjusted for Prices

• To convert nominal output into real output (adjusted for price changes), a Producer Price Index (PPI) would ideally be used — as it measures the prices received by producers. 
• However, since India does not yet have a comprehensive PPI, MoSPI plans to use non-food CPI and sub-sector specific CPI as proxies in the interim.
  • DPIIT is currently working on revising the Wholesale Price Index (WPI) and developing a full Producer Price Index (PPI). 
  • A Working Group has recommended methodologies for compiling PPIs for services sub-sectors like Banking, Insurance, Securities, Pensions, Air Transport, Railways, and Telecom. 

Conclusion

• The ISP, once operationalised, will be a transformative addition to India’s statistical architecture. 
• It will give policymakers — including the RBI’s Monetary Policy Committee — a far more accurate and timely picture of the services sector, which is the backbone of India’s economy. 
• It will also reduce India’s dependence on private sector survey-based indices like the PMI for understanding services output. 
• The initiative reflects MoSPI’s broader push toward evidence-based policymaking through better data.

Source: IE | PIB