SYLLABUS

GS-3: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

Context: The Ministry of Statistics and Programme Implementation (MoSPI) is set to launch the Index of Services Production (ISP), a first-of-its-kind monthly indicator that will measure activity across key service sectors. 

More on the News

• The ISP will complement the Index of Industrial Production (IIP) and provide a monthly snapshot of economic activity in India's services sector, which contributes more than 50% of the country's GDP.

• The first set of trial ISP data is expected to be released on 14 July 2026. 

• ISP will cover the formal services sector and will be released on a monthly basis.

• The index is being developed with 2024-25 as the proposed base year, and trial data will be released about two months after the month being measured.

About the Index of Services Production

• The ISP is a monthly indicator designed to track changes in output across major service industries, similar to the way the Index of Industrial Production (IIP) measures industrial production.

• Initially, the index will cover trade, transport, banking, insurance, telecommunications, hospitality, real estate, professional services and entertainment. 

• Health and education services are expected to be added later as more data becomes available.

• The index will be compiled using a Fixed-Weight Laspeyres Volume Index methodology. 

• It will draw upon multiple data sources, including GST records, administrative data (such as banking, insurance, railways and air transport) and ASISSE (Annual Survey of Incorporated Services Sector Enterprises).

Need for ISP

• Until now, India has relied on indicators such as the Services Purchasing Managers' Index (PMI), GST collections, sector-specific statistics and quarterly GDP estimates to assess service-sector performance. However, these indicators provided only partial insights.

• While the IIP offered a monthly measure of industrial activity, there was no equivalent indicator for services. As a result, monitoring short-term changes in a sector accounting for over half of India's GDP remained a challenge.

• The ISP is expected to bridge this long-standing gap by providing a regular and structured measure of service-sector production. 

• It is also expected to become an important tool for national accounts compilation, government ministries, economists and researchers.

Importance of the ISP

• Filling a Long-standing Data Gap: The ISP addresses a major gap in India's economic statistics by providing a regular and structured measure of service-sector activity, similar to the role played by the Index of Industrial Production (IIP) for the industrial sector. 

• Better Economic Monitoring: Monthly tracking of service-sector output will enable policymakers to identify emerging economic trends and sectoral shifts at an early stage, facilitating timely policy responses. 

• Improved Policy Formulation: By providing granular information on the performance of key service industries, the index will support evidence-based decision-making and more targeted policy interventions. 

• Strengthening Economic Analysis: The ISP will allow economists and researchers to analyse service-sector performance alongside industrial production, offering a more comprehensive assessment of overall economic activity.

• Enhancing National Accounts Compilation: The index is expected to become an important input for national income estimation and improve the accuracy and timeliness of macroeconomic statistics.