Monitoring measures: New services index will help gauge activity over time

The Ministry of Statistics and Programme Implementation (Mospi) on Tuesday released the trial index of services production (ISP), which will act as a high-frequency indicator to gauge short-term economic momentum in the services sector. Although an overall index number has not been given, it is a significant addition in measuring activity in services, which accounts for over half the economic activities in the country. With a base year of 2024-25, the index tracks 19 formal subsectors, covering about 60 per cent of the services economy. The first release for April 2026 shows broadbased strength, with 14 of the 19 subsectors recording double-digit growth in April 2026 compared to April 2025. Accommodation and food services expanded by 37.2 per cent, followed by retail trade (30.8 per cent), administrative and support services (28.7 per cent), and real estate (27.7 per cent). Sectors with a high weighting, such as information technology, retail trade and banking also recorded robust gains, suggesting that services remained resilient despite global uncertainties. However, air transport contracted 14 per cent, compared to a 4.5 per cent increase in the corresponding period last year. 

Earlier attempts to construct a services production index were constrained by the absence of reliable monthly data. The expansion of the goods and services tax (GST) network and the growing availability of administrative datasets have changed this. This has made it possible to develop the ISP, providing a monthly snapshot of the services sector comparable to the index of industrial production (IIP) for manufacturing. Equally important is the effort to improve the measurement of real output. Since the index measures changes in the volume of services produced, while the underlying data captures only the value of transactions, the nominal turnover must be adjusted for price changes to estimate real output. At present, wholesale trade is deflated using the wholesale price index, whereas other services segments are adjusted using either relevant consumer price indices (CPIs) or the nearest available proxy CPI in the absence of sector-specific measures. International statistical standards favour producer price indices (PPIs) as the appropriate deflators for converting nominal turnover into real output. In this context, the recent launch of output PPIs — the trial input PPIs for manufacturing and services PPIs covering seven services sectors — should help over time as they improve. 

Advanced economies such as the United Kingdom, South Korea and members of the European Union have long used monthly services production indices as an integral part of macroeconomic monitoring. In the Indian context, the trial index should be viewed as a work in progress rather than a definitive measure of India’s services economy. By design, it captures only the formal sector because it relies primarily on GST data. The informal sector, which accounts for nearly one-third of services gross value added (GVA), remains outside the index’s ambit owing to persistent data gaps. Public administration, defence and several non-market services are also excluded, while health and education will be incorporated only after data from the Annual Survey of Incorporated Services Sector Enterprises (ASISSE) becomes available. Now that the foundation has been laid, seasonal adjustment to reduce fluctuations in monthly readings, broader sectoral coverage, improved data quality, and continuous methodological refinement will determine whether the experimental series matures into a robust economic indicator.