The Index of Services Production covers 60 per cent of the services sector in terms of types of business activities | Photo Credit: ALLEN EGENUSE J

For a country where services accounts for 55 per cent of GDP, the need for a high frequency output indicator cannot be over-emphasised. The Index of Services Production, with 2024-25 as base year, has recently been unveiled on a trial basis to provide data each month, with a 60-day lag. Therefore, the data released on July 14, reflecting the performance of 19 sub-sectors, pertains to the year-on-year growth of services in April 2026.

As many as 14 of the 19 sectors recorded double-digit growth, with some sectors such as accommodation and food (37.2 per cent), retail trade (30.8 per cent), administrative and support services (28.7 per cent) and real estate (27.7 per cent) leading the growth surge. There are good reasons to run the ISP trials without being in a big hurry to bring it on stream. The April 2026 numbers are sharply higher than trend growth in services. The quarterly GDP data can remain the anchor for now. The ISP push has been propelled by the availability of high frequency GST data, the launch of the Annual Survey of Incorporated Service Sector Enterprises and the improvement in administrative databases (for sectors such as electricity, railways and mining) as a result of digitisation. At present, administrative data as well as various surveys are in use. The accuracy of this index would depend on the robustness of GST data (a factor that came up with respect to the formulation of the new IIP), the accuracy of sector-specific deflators and the coverage of the unorganised sector.

To take the last point first, the ISP covers 60 per cent of the services sector in terms of types of business activities, but in terms of enterprises, nearly 50 per cent of services GVA has probably not been covered. The approach paper prepared for ISP says that the ‘temporary exclusion’ of health and education till Survey data comes on stream could account for 10 per cent of services GVA, while the rest of the enterprise exclusions could be in the region of 33 per cent. Other sectors that have been left out for now are public administration and defence, financial services other than banking and insurance, and a range of social work activities and personal services. The GST net should be expanded to make claims of ‘formalisation’ of the economy ring true.

ISP aims at using turnover (reliable in the case of services as they are immediately consumed with no inventory) and specific deflators. In some cases, volume based metrics may have to be used, such as, say, policies sold in the insurance sector. Deflators (input and output) are ideally meant to be derived from granular services PPI, but they are a work in progress. The ISP deflators for now are broad rather than specific — such as CPI (general) being applied to repair, banking and insurance and CPI (Services) being used for IT, R&D and administration. Much remains to be done. That said, the move to ISP, alongside a revamped WPI and IIP, marks a big data reform achievement.

Published on July 17, 2026