Every month India knows how much steel, cement or electricity its factories produce. But until now, it had no official way of measuring what its biggest sector—services—was actually producing. Services contribute nearly 55% of India's Gross Value Added (GVA), but unlike manufacturing, there has never been a monthly index to track how much the sector is producing. To bridge this gap, the Ministry of Statistics and Programme Implementation (MoSPI) has introduced the trial Index of Services Production (ISP).
Compiled by the National Statistical Office (NSO), it is a monthly indicator of real services output. It is expected to improve the way the economy is tracked, although measuring India's vast services sector—especially informal and digital activities—remains difficult.
The lack of such an index became more noticeable as India's economy changed over the decades. In 1950-51, agriculture was the biggest contributor to the economy, while industry and services played a smaller role. Today, services account for more than half of economic output, making the absence of a monthly measure a major gap in official statistics.
Timeline
1937: India introduces the Index of Industrial Production (IIP) to track industrial output.
1991 onwards: Economic reforms accelerate the expansion of services such as finance, IT, telecommunications and trade.
2010s: Services become India's largest economic sector, contributing more than half of GVA.
2024-25:MoSPI develops the methodology for the Index of Services Production with 2024-25 as the base year. A Technical Advisory Committee headed by Debjani Ghosh finalises the framework.
April 2026: First reference month for the trial index.
July 14, 2026: NSO releases the first trial monthly ISP, and now onwards, the methodology will be refined before regular publication.
What is ISP and why India needs it?
The ISP is India's first official monthly index that measures changes in the amount of services being produced. It is for the services sector what the Index of Industrial Production (IIP) is for factories.
India has long published monthly industrial output through the IIP, but there was no similar measure for services, even though the sector contributes about 55% of GVA. As a result, policymakers, businesses and economists had to depend on separate indicators such as GST collections, bank lending, air passenger traffic, digital payments and business surveys to judge how the services sector was performing.
How is the ISP different from GDP?
GDP measures the value added by the entire economy and is released every quarter after combining data on production, spending and income. The ISP is released every month, with a two-month delay, and measures changes in the real output of selected service industries. Its purpose is to show how the economy is performing from month to month, not to calculate national income.
How is the ISP different from the Purchasing Managers' Index (PMI)?
The PMI is based on surveys of business managers and shows whether business conditions are improving or worsening. The ISP is an official index based mainly on government records and measures actual services output after removing the effect of inflation. In simple terms, the PMI reflects business sentiment, while the ISP measures actual economic activity.
Which sectors does the ISP cover?
The trial index covers more than 40 service sub-sectors grouped into 19 broad categories. These include wholesale and retail trade, transport, storage, information technology, telecommunications, banking, insurance, real estate, professional services, hotels, restaurants and administrative support services. Together, they account for about 60% of India's services GVA.
How is the ISP prepared?
The main source of data is the Goods and Services Tax Network (GSTN), which provides information on business activity and sales by formal enterprises. This is supported by records from government departments such as Railways and Civil Aviation, as well as the Annual Survey of Incorporated Services Sector Enterprises (ASISSE). These are combined using fixed weights based on each sector's importance in the base year to produce a monthly index.
How does the ISP measure 'real' output?
The data collected are based on current prices, which include the effect of inflation. To measure real output, MoSPI removes the impact of price changes. For now, it uses the Non-food Consumer Price Index (CPI) as a temporary measure. A separate Producer Price Index (PPI) for services is expected to be used once it becomes available.
Why is the ISP important for economic policy?
The index gives policymakers a regular picture of activity in India's biggest sector. It can help improve GDP estimates, track economic trends more closely and detect slowdowns before quarterly GDP data are released. It also gives the Reserve Bank of India another monthly indicator to assess economic growth.
How will businesses and investors use it?
Businesses can use the index to understand demand in sectors such as trade, transport, hospitality, finance and information technology. Investors can use it to track the economy more closely, improve forecasts and identify trends before quarterly company results and GDP figures are published.
Why is measuring services difficult?
Unlike manufactured goods, services cannot usually be counted in physical units. A doctor's consultation, a software update, legal advice or a financial transaction cannot be measured the way steel or cement can. Differences in quality, changing technology and customised services make them much harder to measure consistently.
Does the ISP cover the informal economy?
Not yet. The current index mainly covers the formal sector because reliable administrative data are available for it. But the informal sector makes up nearly one-third of India's services GVA and is not fully included. Bringing it into the index will require better data and new methods of measurement.
Which sectors are not fully covered?
Some activities are only partly covered or left out altogether. These include government-run health and education, public administration, defence, social work and parts of the financial sector. Where official records are not available, private health and education are estimated through enterprise surveys.
How does the ISP compare with other countries?
Many developed countries already publish monthly indicators for the services sector. The United Kingdom has an Index of Services that is used in GDP estimates, while Japan publishes a Services Industry Activity Index. The United States uses official data along with business surveys to monitor services. The ISP brings India closer to these international practices.
What are the limitations of the trial index?
The ISP is still an experimental series, so its methods and coverage are likely to improve over time. Since it depends heavily on GST data, much of the informal economy is still outside its scope. Also, the absence of a dedicated Producer Price Index for services makes it harder to measure real output with complete accuracy.
What is the next phase?
Over time, the ISP could become as important as the Index of Industrial Production and the Consumer Price Index in tracking the economy every month. It will give policymakers, businesses and investors a more complete picture of how India's economy is performing. But for the index to become truly representative, it will need to expand beyond the formal sector and capture the millions of service transactions that take place across the country.
