Services output growth cools in May as postal, broadcasting contract

NSO's trial services index shows fewer sectors posting double-digit growth, though accommodation, banking and retail continue to lead the expansion

Eight of the 19 services sub-sectors recorded double-digit growth in May, down from 14 in April, with the broader data pointing to a moderation, according to the second print of the trial Index of Services Production (ISP) released by the National Statistics Office (NSO) on Wednesday.

 

The ISP data showed that 16 sub-sectors posted positive growth in May, down from 17 a month earlier. Two sectors that had expanded in April slipped into contraction. Postal and courier services, which grew 3.3 per cent in April, contracted 1 per cent in May, while information and broadcasting swung from 2.5 per cent growth to a 7.6 per cent contraction.

   

On the other hand, railway transport turned positive, rising 3.4 per cent after a 0.4 per cent decline in April. Air transport remained in contraction for a second consecutive month, though the pace of decline narrowed sharply to 2.8 per cent from 13.9 per cent in April, the data showed.

 

D K Srivastava, chief policy advisor at EY India, said that although an overall index has not been published, the weighted growth of the 19 sectors eased to 9.8 per cent in May from 20.8 per cent in April.

 

Accommodation and food remained the fastest-growing segment, although growth slowed to 27.4 per cent from 37.2 per cent. Real estate (17.7 per cent), retail trade (13.3 per cent), banking (12.1 per cent) and telecommunications (11.8 per cent) rounded out the top performers.

 

The sharpest loss of momentum came in administrative and support services, where growth slowed to 5 per cent from 28.7 per cent. Retail trade growth more than halved from 30.8 per cent, while wholesale trade slowed to 3.7 per cent from 15.3 per cent.

 

In index terms, accommodation and food stood highest at 148.9, followed by arts, entertainment and recreation at 140.6 and retail trade at 138.1. At the other end, insurance stood at 91.1, with postal and courier services at 98 and air transport at 99.9.

 

The main services that grew by more than 10 per cent in May were retail trade, accommodation and food, telecommunications, banking, and information technology (IT) and computer-related services.

 

Srivastava said the average growth for eight key services, accounting for nearly 87 per cent of the total weight of the 19 covered services, was 10.3 per cent in May 2026.

 

"There are clear indications of robust growth momentum for Q1 FY27, with IIP growth in this quarter showing an average growth of 5.7 per cent and the services (ISP) sector for the first two months of this quarter showing an average growth of 15.3 per cent," he said.

 

The trial ISP, with 2024-25 as the base year, accounts for nearly 60 per cent of India's services output. It is India's first high-frequency measure of monthly activity in the services sector, filling a long-standing gap alongside the Index of Industrial Production (IIP).