India’s economy has transformed dramatically over the past few decades, with the services sector emerging as the largest contributor to GDP. Despite this, India lacked a dedicated high-frequency indicator to measure monthly performance of the services sector.
To bridge this gap, the Ministry of Statistics and Programme Implementation (MoSPI) has introduced the Index of Services Production (ISP)—India’s first monthly indicator designed to track the real output of the formal services sector.
The launch of ISP marks a significant milestone in India’s statistical modernization and evidence-based policymaking.
Why is ISP in News?
- Government released the first Trial Index of Services Production (ISP) for April 2026.
- Covers 19 service sub-sectors, representing nearly 60% of India’s services sector.
- Uses Base Year: 2024-25.
- Monthly data will be released with a 60-day lag.
What is the Index of Services Production (ISP)?
The Index of Services Production (ISP) is a high-frequency macroeconomic indicator that measures the volume of output produced by India’s formal services sector relative to a base year.
Unlike value-based indicators, ISP captures real growth after removing the effect of inflation.
Objective
- Measure monthly services sector performance.
- Improve National Accounts estimation.
- Support evidence-based policymaking.
- Track short-term economic trends.
Why was ISP Needed?
India already publishes the Index of Industrial Production (IIP).
However,
- IIP measures only industrial output.
- No similar indicator existed for services.
- Services contribute over half of India’s economy, making a dedicated index essential.
Hence, ISP fills this important statistical gap.
Importance of India’s Services Sector
The services sector is the backbone of the Indian economy.
Key Statistics
- Contributes 52.9% of Gross Value Added (GVA) (2024-25).
- Accounts for around 30% of total employment.
- Generated nearly 40 million jobs in the last six years.
- Services exports reached USD 103.41 billion during April–June FY 2026-27, registering 6.16% YoY growth.
- India aims to achieve 10% share in global services exports by 2047.
Key Features of ISP
Base Year
2024-25
Aligned with the new Consumer Price Index (CPI) series.
Frequency
- Monthly
- Released every month
- Approximately 60-day time lag
Coverage
Initial ISP covers 19 service sub-sectors, representing nearly 60% of India’s services economy.
Main Users
- MoSPI
- National Accounts Division
- RBI
- Economic Ministries
- Researchers
- Policymakers
- Economists
Top Performing Sectors (April 2026)
| Sector | Growth (%) |
|---|---|
| Accommodation & Food | 37.2 |
| Retail Trade | 30.8 |
| Administrative & Support Services | 28.7 |
| Real Estate | 27.7 |
| Telecommunications | 22.8 |
Top Performing Sectors (FY 2025-26)
| Sector | Growth (%) |
|---|---|
| Accommodation & Food | 35.6 |
| Retail Trade | 30.5 |
| Repair Services | 25.1 |
| Wholesale Trade | 23.6 |
| Road Transport | 22.6 |
Why are Price Deflators Used?
Service sector data is generally collected in nominal (current price) terms.
However, nominal growth reflects both:
- Increase in prices
- Increase in actual output
To measure real production, inflation must be removed.
This is done using Price Deflators.
Formula
Real Output = Nominal Output ÷ Price Deflator
Deflators Used in ISP
| Sector | Deflator Used |
|---|---|
| Wholesale Trade | WPI |
| Banking | CPI-General |
| Insurance | CPI-General |
| Repair Services | CPI-General |
| Other Services | Relevant CPI |
| Where Sector-Specific CPI unavailable | CPI-Services |
Data Sources Used in ISP
1. GST Data (Used for the First Time)
Major sectors include:
- Wholesale Trade
- Retail Trade
- Road Transport
- Warehousing
- Postal Services
- Telecommunications
- Real Estate
- Information Technology
- Professional Services
- Administrative Services
- Entertainment
2. Administrative Data
Used for
- Railways
- Air Transport
- Banking
- Insurance
3. ASISSE
Annual Survey of Incorporated Services Sector Enterprises
Launched in April 2026.
Provides data for
- Private Health
- Private Education
Services Excluded from ISP
The following sectors are currently excluded:
- Public Administration
- Defence
- Central Bank Activities
- Money Market Funds
- Government Health Services
- Government Education
- Social Work without Accommodation
- Membership Organisations
- Household Services
- Gambling & Betting
- Extraterritorial Organisations
Reason
These sectors are:
- Non-market in nature
- Government dominated
- Informal sector intensive
- Difficult to measure monthly
Institutional Framework
MoSPI constituted a Technical Advisory Committee (TAC) in May 2025.
The committee included experts from:
- Academia
- Industry
- Government Ministries
- Statistical Organisations
International Best Practices
The ISP framework is based on
- OECD Compilation Manual on Index of Services Production (2007)
- Eurostat Guidelines
Countries already publishing similar indices include
- United Kingdom
- South Korea
- France
- Spain
- Slovenia
Advantages of ISP
- Better tracking of India’s largest economic sector.
- Improves GDP and GVA estimation.
- Enables faster policy interventions.
- Supports RBI and fiscal policy decisions.
- Uses modern digital administrative databases.
- Integrates GST data into official statistics.
- Strengthens evidence-based governance.
Challenges
- Limited initial coverage (around 60%).
- Heavy dependence on GST reporting quality.
- Informal services remain difficult to capture.
- Multiple price deflators may create methodological complexity.
- Government-dominated services remain excluded.
ISP vs IIP
| Feature | ISP | IIP |
|---|---|---|
| Measures | Services Output | Industrial Output |
| Sector Covered | Services | Mining, Manufacturing & Electricity |
| Frequency | Monthly | Monthly |
| Base Year | 2024-25 | 2022-23 (latest series) |
| Importance | Measures India’s largest economic sector | Measures industrial performance |
UPSC Prelims Pointers
- First dedicated high-frequency indicator for services.
- Released by MoSPI.
- Base Year: 2024-25.
- Measures real (volume) output, not nominal value.
- Uses GST, Administrative Data and ASISSE.
- Wholesale Trade uses WPI as deflator.
- Most services use CPI.
- Covers 19 service sub-sectors.
- Trial release covers nearly 60% of the services sector.
UPSC Mains Relevance
GS Paper III – Indian Economy
Possible questions:
- Discuss the significance of the Index of Services Production (ISP) in improving India’s economic statistics.
- Why is a dedicated services sector indicator necessary despite the existence of the Index of Industrial Production (IIP)?
- Explain how the ISP can strengthen evidence-based policymaking and macroeconomic management in India.
Conclusion
The Index of Services Production (ISP) is a landmark reform in India’s statistical architecture. By providing a monthly, inflation-adjusted measure of services sector output, it fills a long-standing gap in economic measurement. With the services sector contributing more than half of India’s Gross Value Added and playing a pivotal role in employment and exports, the ISP will significantly enhance economic monitoring, improve national accounts estimation, and enable more responsive policymaking. As coverage expands over time, the ISP is expected to become one of the most important indicators for assessing India’s growth trajectory and supporting its vision of becoming a global leader in services by 2047.
UPSC Prelims Practice MCQs
MCQ 1
With reference to the Index of Services Production (ISP), consider the following statements:
- It is India’s first high-frequency indicator to measure the output of the formal services sector.
- The base year of the ISP is 2024–25.
- The Index of Industrial Production (IIP) also measures the performance of the services sector.
Which of the statements given above is/are correct?
A. 1 and 2 only
B. 2 and 3 only
C. 1 and 3 only
D. 1, 2 and 3
Answer: ✅ A. 1 and 2 only
Explanation:
- Statement 1: Correct. ISP is India’s first dedicated high-frequency indicator for measuring the output of the formal services sector.
- Statement 2: Correct. The base year is 2024–25.
- Statement 3: Incorrect. The Index of Industrial Production (IIP) measures mining, manufacturing, and electricity, not services. ISP was introduced to fill this gap.
MCQ 2
Consider the following statements regarding the Index of Services Production (ISP):
- GST data is being used for the first time in the compilation of an official statistical indicator like the ISP.
- The Wholesale Price Index (WPI) is used as the price deflator for wholesale trade under the ISP.
- Public administration and defence are included in the initial coverage of the ISP.
Which of the statements given above is/are correct?
A. 1 and 2 only
B. 2 and 3 only
C. 1 only
D. 1, 2 and 3
Answer: ✅ A. 1 and 2 only
Explanation:
- Statement 1: Correct. GST data is being used for the first time in an official statistical application for compiling the ISP.
- Statement 2: Correct. Wholesale Trade uses the Wholesale Price Index (WPI) as the price deflator.
- Statement 3: Incorrect. Public administration and defence are excluded from the ISP because they are largely government-dominated and non-market activities.
UPSC Tip: Remember the trio associated with the ISP:
- Base Year: 2024–25
- Compiled by: Ministry of Statistics and Programme Implementation (MoSPI)
- Key Data Sources: GST data, Administrative data, and ASISSE (Annual Survey of Incorporated Services Sector Enterprises).
