India To Launch First-Ever Index Of Services Production In July

New Delhi, May 22 (KNN) India is set to introduce its first-ever Index of Services Production (ISP) around July, marking a significant step towards measuring short-term activity in the country's services sector, which contributes more than half of the national economy and generates millions of jobs.

The new index will complement the revised series of the Index of Industrial Production (IIP), based on the 2022-23 base year, which is scheduled to be released on June 1.

New Tool to Track Services Sector Output 

According to officials, the ISP will provide a more comprehensive assessment of short-term production trends in the services sector and strengthen the statistical framework used for estimating economic growth.

Initially, the index will be released with a two-month lag and is expected to provide data for April 2026 when launched.

Officials said the ISP will also support the compilation of quarterly national accounts estimates, including advance estimates and provisional GDP figures, by offering a more robust measure of services-sector activity.

The index is expected to draw primarily from data available through the Goods and Services Tax Network (GSTN), supplemented by administrative data from various ministries and regulatory bodies.

GST Data and Digital Records to Drive Index 

Government officials noted that earlier attempts to create a services production index were constrained by limited data availability. However, greater digitalisation of administrative records and the availability of GSTN data have significantly improved the ability to track production and outward supplies across sectors.

At present, analysts largely depend on the HSBC Services Purchasing Managers’ Index (PMI) to assess monthly trends in the services economy. However, the PMI is based on business sentiment and indicates whether activity is expanding or contracting, rather than measuring actual output levels.

The proposed ISP aims to fill this gap by providing a data-driven measure of production in the services sector.

Better Economic Monitoring and GDP Estimation 

Recently, the Ministry of Statistics and Programme Implementation released a draft consultation paper outlining the methodology for the new index and invited stakeholder feedback.

The paper proposes a temporary exclusion of the health and education sectors, which together account for around 10 per cent of services gross value added (GVA), until results from the Annual Survey of Incorporated Service Sector Enterprises become available.

The launch of the ISP is expected to improve the monitoring of economic activity and provide policymakers, businesses and analysts with a more accurate gauge of trends in India's rapidly expanding services sector.

(KNN Bureau)