Why does India need an Index of Services Production? | Explained
The Ministry of Statistics and Programme Implementation (MoSPI) finalised the framework for India's first Index of Services Production (ISP) through a Technical Advisory Committee (TAC-ISP) report, with a trial series scheduled for release
The ISP is designed to provide a monthly measure of short-term changes in services sector output, complementing the existing Index of Industrial Production (IIP), which covers only manufacturing, mining, and electricity
The index will be compiled primarily using Goods and Services Tax (GST) outward-supply data for most market services, supplemented by administrative records (railways, air transport, banking, insurance) and survey data for GST-exempt services such as health and education
MoSPI clarified that GST data used for the index is aggregated, imposes no additional compliance burden on businesses, and does not require access to unit-level taxpayer information
Why India Needs a Monthly Services Indicator: The GDP/IIP Gap
India's official measures of economic activity — quarterly GDP/GVA (Gross Value Added) estimates from the National Accounts and the monthly Index of Industrial Production (IIP) — have historically covered manufacturing and industry with high frequency but left services, the largest and fastest-growing part of the economy, without a comparable monthly output indicator. Existing services indicators (like PMI Services, a private survey) are sentiment-based rather than production-based, creating a measurement gap for a sector that increasingly drives growth, employment, and exports.
Key Details
- Services contribute close to 53% of India's Gross Value Added (GVA), making it the largest sector by share of the economy
- The IIP is released monthly by the Ministry of Commerce and Industry's Office of the Economic Adviser, but covers only industry (mining, manufacturing, electricity) with a 2011-12 base year historically, since revised
- Prior to the ISP, GDP/GVA services estimates were available only quarterly, with significant lags and reliance on indirect proxy indicators for many sub-sectors
The ISP is explicitly designed as a "panacea" to this gap — a monthly, production-based measure of services output that did not previously exist, mirroring what the IIP already does for industry.
GST Data as Statistical Infrastructure
Since its rollout on 1 July 2017, the Goods and Services Tax (GST) — a destination-based, multi-stage indirect tax with Central GST (CGST), State GST (SGST), and Integrated GST (IGST) components — has generated a large, near-real-time administrative dataset of registered enterprises' outward supplies. Statistical agencies increasingly use this GST Network (GSTN) data as a "data backbone," reducing reliance on sample surveys for national accounts and sectoral indices.
Key Details
- The ISP uses GST outward-supply data for the bulk of market services — wholesale and retail trade, real estate, telecom, and professional services — adjusted with appropriate price deflators to estimate real (volume) output changes
- Health and education services, being largely GST-exempt, are instead measured through the Annual Survey of Incorporated Services Sector Enterprises (ASISSE)
- MoSPI's broader 2026 GDP base-year revision (to 2022-23) also expanded use of GST data for Quarterly National Accounts, alongside new administrative data sources such as PFMS (government expenditure) and e-Vahan (land transport)
The ISP is a direct product of this shift — its core innovation is repurposing GST returns, already collected for tax administration, as the primary data source for a new economic index, avoiding fresh survey burden on businesses.
Index Number Methodology: Laspeyres Index and Base Year
A Laspeyres index is a fixed-base-weighted index number that measures the change in a set of quantities (or prices) over time using weights fixed at a base period. It is the standard methodology underlying most Indian economic indices, including the IIP and the Wholesale Price Index (WPI), because it allows straightforward year-on-year comparison against a fixed reference point until the base is periodically revised.
Key Details
- The ISP is recommended to be compiled as a Laspeyres volume index with 2024-25 as the base year, using GVA-based weights
- Sector-wise sub-indices are to be published at the two-digit National Industrial Classification (NIC) 2025 level — NIC being India's standard classification system for economic activities, revised periodically (previous major revision: NIC 2008)
- The index will be released monthly with an approximate 60-day lag, with regular releases scheduled for the 29th of every month after the initial trial series
The choice of base year (2024-25) and classification system (NIC 2025) reflects MoSPI's parallel modernisation of India's statistical base years, following the broader shift of the GDP/IIP base year to 2022-23 earlier in 2026.
- Services sector share of India's Gross Value Added: approximately 53%
- ISP base year: 2024-25; index type: Laspeyres volume index with GVA weights; classification level: two-digit NIC 2025
- Data sources: GST outward-supply data (bulk of market services); administrative records for railways, air transport, banking and insurance; ASISSE survey for GST-exempt health and education services
- Release cadence: monthly, with an approximate 60-day lag; regular releases from the 29th of each month after the initial trial series
- MoSPI's TAC-ISP framework report released ahead of a trial ISP series; broader GDP/IIP base-year revision (to 2022-23) announced earlier in 2026, the first such revision since the 2011-12 base year was adopted in January 2015