Next week, India will introduce a new high-frequency indicator to track activity in the country's services economy, marking a major expansion of the statistical toolkit used to assess short-term economic trends.

The Ministry of Statistics and Programme Implementation (MoSPI) is set to release the first Index of Services Production (ISP), based on 2024-25 as the new base year, on July 14. The indicator is designed to provide policymakers, businesses and investors with a more timely picture of economic activity in a sector that now contributes well over half of India's gross value added (GVA).

Until now, monthly assessment of economic momentum has largely depended on the Index of Industrial Production (IIP), even though the services sector has emerged as the dominant engine of growth.

Economists have long argued that the absence of a comparable high-frequency services indicator limited the ability to track changes in the broader economy, particularly during periods of uneven demand.

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The new index is expected to bridge that gap by measuring output across a wide range of market-based services, including trade, transport, telecommunications, accommodation, entertainment, financial activities and real estate.

Together, these segments account for nearly two-thirds of the services sector's GVA, making the index a meaningful gauge of economic activity.

However, the first version of the ISP will not provide complete coverage of the sector. Services such as education and healthcare have been kept outside its ambit for now because the required datasets are still under development.

Their inclusion is expected after the rollout of the Annual Survey of Incorporated Services Sector Enterprises (ASISSE), which is being prepared to strengthen data availability.

The index will also exclude the informal services economy and non-market services such as public administration, defence, social work and central banking activities, reflecting the current limitations of administrative data sources.

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Unlike traditional surveys, the ISP will rely heavily on digital and administrative databases to ensure timely compilation.

The Goods and Services Tax Network (GSTN) will serve as the principal source of information, supplemented by operational data from sectors such as railways, civil aviation, banking and insurance.

Officials expect this approach to improve both the frequency and reliability of estimates while reducing reporting delays.

A committee chaired by NITI Aayog Fellow Debjani Ghosh has recommended that the index initially be published on a trial basis, along with detailed sub-sector readings, to allow users to provide feedback before the framework is fully institutionalised.

The panel has also proposed releasing the index around 60 days after the end of the reference month, aligning it with the need for timely economic assessment.

The launch of the ISP comes as India modernises its national accounts and statistical systems. The government has already announced a revised GDP series with a 2024-25 base year and has been expanding the use of administrative data in official statistics.

Recent ET reports have highlighted MoSPI's broader effort to improve the quality and timeliness of macroeconomic indicators as the economy becomes increasingly services-led.

The Ghosh committee has also been tasked with preparing a methodology for measuring India's rapidly expanding digital economy. Its recommendations are expected to provide the foundation for future statistical indicators covering digital businesses and technology-enabled services, an area that has become an increasingly important contributor to economic growth but remains only partially captured in existing datasets.

The introduction of the ISP is expected to give policymakers a more balanced view of monthly economic conditions by complementing the industrial production index and offering a clearer assessment of activity across the country's largest growth driver.