India’s Ministry of Statistics and Programme Implementation (MoSPI) will release the country’s first monthly Index of Service Production (ISP) on July 14. The index has been developed on the lines of the Index of Industrial Production (IIP) to measure the performance of the services sector on a regular basis.
The services sector accounts for more than 50 percent of India’s economy and is the largest contributor to the country’s Gross Domestic Product (GDP). In recent years, the expansion of information technology, financial services, transport, communication and other service activities has increased the sector’s role in the Indian economy. According to experts, India’s services exports could surpass merchandise exports over the next few years.
The Index of Service Production (ISP) will serve as a monthly economic indicator measuring activity and output across various service sectors. Similar to how the Index of Industrial Production (IIP) reflects the performance of manufacturing, mining and electricity, the ISP will provide regular assessments of changes in the services sector.
The index is intended to help the government, policymakers, investors, industry and research institutions assess the current state of the services sector. It will also support more accurate estimates of the direction and pace of economic growth.
According to the statistics department, the ISP will be compiled using data from several key service sectors, including:
- Air transport
- Indian Railways-related services
- Other transport services
- Banking and insurance
- Wholesale and retail trade (GST-based data)
- Communication services
- Real estate activities
- Information technology and computer-based services
- Professional and technical services
- Research and Development (R&D)
- Entertainment and cultural services
The government has indicated that health and education services may also be incorporated into the index in the future to broaden its coverage.
Certain service sectors will remain outside the scope of the ISP during its initial phase. These include:
- Public administration and defence services
- Financial services other than banking and insurance
- Social and personal services
- Gambling and betting-related activities
- Informal service sector
The government said that, at present, only organised service sectors with reliable and regular data availability have been included in the index.
The ISP will use both volume-based and value-based measures to assess service production. For railway and air transport services, volume indicators such as passenger-kilometres and freight movement will be used. For banking, insurance, information technology, real estate and other business services, revenue or value-based data generated from service activities will form the basis of measurement.
The mixed methodology is intended to reflect actual economic activity in the services sector more accurately. As the contribution of the services sector to the Indian economy continues to increase, the government considers regular monitoring of the sector necessary. While the IIP has been available for industrial production, no official monthly index with a similar frequency has existed for the services sector.
With the introduction of the ISP, the government will be able to assess changes in economic activity in a timely manner, understand trends in growth rates and undertake necessary policy interventions. The index is also expected to support national income estimation, economic research, budget planning and data-based policymaking across ministries.
