Index of Services Production (ISP)

Context

In July 2026, the Ministry of Statistics and Programme Implementation (MoSPI) will officially introduce the Index of Services Production (ISP). This new high-frequency macroeconomic indicator is designed to monitor short-term quantity variations within the services industry.

About the News

Background:

While the Index of Industrial Production (IIP) has traditionally served as the primary tool for measuring factory and industrial output, no corresponding monthly barometer existed for the services domain. This created a critical data gap. Given that the services sector has consistently driven over 50% of India’s Gross Value Added (GVA) since the 2013–14 fiscal period, MoSPI established a Technical Advisory Committee (TAC) to build a robust statistical framework capable of capturing monthly output changes in real volume.

Key Features and Timeline:

• Base Year Selection: The framework operates on 2024–25 as its base year, ensuring structural alignment with updated consumer price indexes.
   
• Formal Sector Focus: The index predominantly covers formal corporate operations because its primary parameter thresholds rely on businesses registered within the national tax framework.
   
• Phased Implementation: Essential commercial fields like logistics, trade, banking, and telecom will be tracked immediately. Non-governmental health and education services will be integrated at a later stage.
   
• Release Cycle and Lag: MoSPI will publish experimental trial indices for the 2025–26 fiscal year on July 14, 2026. Subsequent regular monthly iterations will feature a 60-day lag, releasing systematically on the 29th day of each month.
   Press Release Page |

Methodological Framework and Calculation

Multilateral Data Sourcing

The ISP derives its raw data parameters from three distinct institutional pipelines:

• GST Network Database: Aggregated transactional records from GSTR-1 outward supply forms provide real-time indicators of service turnover.
   
• Administrative Records: Direct quantity and performance metrics are pulled from secondary datasets, such as railway and aviation statistics or banking and insurance registers.
   
• Targeted Corporate Surveys: Data for specialized non-governmental fields will be extracted from the Annual Survey of Incorporated Services Sector Enterprises (ASISSE).
   

The Deflation Protocol

Because data harvested via tax registries is inherently nominal (value-based), it must be deflated using specific price indices to compute pure volume changes:

• Wholesale trade adjustments rely on the Wholesale Price Index (WPI).
• Financial fields like Banking and Insurance utilize the General Consumer Price Index (CPI).
• Remaining segments use specialized CPI Divisions or the CPI (Non-Food) index as proxy measures.

Weight Structuring and Statistical Formula

Individual sub-sector weights are strictly assigned based on their structural share in the Gross Value Added (GVA) reported by National Accounts Statistics. The final index calculation aggregates these values through a fixed-weight Laspeyres volume formula.

Strategic Constraints and Exclusions

Structural Data Coverage

By prioritizing formal enterprises monitored through tax frameworks, the index leaves out a significant portion of the informal economy.

Key Sector Exclusions

To maintain focus on commercial volume, several areas are explicitly excluded from the ISP framework:

• Core public administration and national defence operations.
• Central banking monetary activities and currency management.
• Social work initiatives without associated accommodation.
   KNN India
• Membership organizations, gambling operations, and personal household employment services.
   KNN India

Way Forward

Policy Formulation and Forecasting:

• Enhanced Macroeconomic Monitoring: Combine ISP data with traditional IIP trends to provide planners and central authorities with a comprehensive, dual-engine view of high-frequency economic cycles.
• Evidence-Based Interventions: Leverage regular monthly services data to fine-tune economic forecasts, target credit allocations, and guide service-sector tax planning.

Data Integration and Expansion:

• Expediting Survey Results: Accelerate the compilation of ASISSE reports to rapidly incorporate missing elements like formal healthcare and education into the core calculation.
• Refining Price Deflators: Establish dedicated Producer Price Indices (PPI) specifically tailored for service sub-sectors to gradually phase out the reliance on CPI and WPI proxies.

Conclusion

The rollout of the Index of Services Production bridges a long-standing gap in India's statistical infrastructure. By providing timely, high-frequency volume metrics for a sector that commands over half of the national economy, the ISP ensures that future fiscal and monetary choices are supported by data that accurately reflects structural economic realties.