The services sector has become an increasingly important pillar of India’s economy. However, unlike the Index of Industrial Production (IIP) for manufacturing and industry, there has been no official monthly indicator to track activity in the services sector. As a result, analysts have largely relied on quarterly GDP data, administrative records, and other indirect indicators to assess the economy’s short-term performance.
To address this gap, the Ministry of Statistics and Programme Implementation of India (MoSPI) is introducing India’s first monthly Index of Services Production (ISP).
Let us understand India’s Index of Services Production in detail and explore how this new indicator could benefit the economy, policymakers, businesses, and investors.
What’s Happening?
MoSPI released the first trial series of the Index of Services Production (ISP) on July 14, 2026. The trial release includes monthly index data for FY26 along with figures for April 2026. Going forward, the trial index will be released every month with a lag of around 60 days, on the 29th of the month or the next working day if the 29th falls on a holiday.
The index uses FY25 as its base year. Its objective is to measure changes over time in the real output of service industries compared with the base period. It has been designed as the services sector counterpart to the Index of Industrial Production (IIP).
A Technical Advisory Committee for the ISP was constituted in May 2025 under the chairmanship of Debjani Ghosh. Following extensive consultations, MoSPI released an approach paper outlining the methodology and framework in April 2026 to seek feedback from stakeholders.
Which Services Will Be Included in the Index?
The ISP will primarily cover the formal services sector. Its initial coverage includes wholesale and retail trade, repair and maintenance services, road and water transport, warehousing, hotels and restaurants, postal and courier services, telecommunications, banking, insurance, and real estate.
The index will also cover information technology and computer-related services, professional, scientific and technical services, administrative support services, and arts, entertainment, and recreation. According to The Times of India, the initial version of the ISP will cover nearly two-thirds of the services sector’s Gross Value Added (GVA).
However, healthcare and education will not be included in the initial release. These sectors are expected to be added once data becomes available through the Annual Survey of Incorporated Services Sector Enterprises (ASISSE). Similarly, public administration and defence, ownership of dwellings, and certain informal or non-market activities will remain outside the initial scope of the index.
How Will the ISP Be Prepared and How Is It Different From the PMI?
The ISP will be compiled using the fixed-weight Laspeyres volume methodology. Each service category will be assigned a weight based on its contribution to sectoral GVA. For most market-based services, the index will rely heavily on outward supply data captured through GST returns.
For sectors such as railways and air transport, quantity-based indicators like passenger traffic and freight movement may be used. In banking, insurance, and other incorporated services, administrative records and ASISSE data will serve as key inputs.
The ISP should not be confused with the Services Purchasing Managers’ Index (PMI). The PMI is a survey-based diffusion index, where a reading above 50 indicates expansion and a reading below 50 signals contraction. In contrast, the ISP is a production-based index derived from administrative and statistical data that measures the actual volume of services output. While the PMI provides an early indication of business sentiment, the ISP will offer a more comprehensive measure of real economic activity.
What Does This Mean for Investors?
The introduction of the ISP means investors will no longer have to rely solely on quarterly GDP figures or the Services PMI to gauge the health of the services sector. The new index will provide a clearer monthly picture of activity across sectors such as banking, insurance, telecommunications, transport, hospitality, real estate, information technology, and professional services.
By analysing the ISP alongside the IIP, investors will be able to better understand whether economic growth is being driven by industry or services. This could provide valuable insights into demand trends, business cycles, and sector-specific performance.
However, investors should also recognise that the initial series is being released on a trial basis and does not yet fully represent healthcare, education, or the informal services sector. Therefore, the ISP should be viewed as a broad macroeconomic and sectoral indicator rather than a direct signal for buying or selling individual stocks.
What’s Next?
Over time, the Index of Services Production (ISP) could become an important monthly indicator for both the Reserve Bank of India (RBI) and the government to monitor activity in the services sector. It is expected to improve the assessment of economic growth, demand conditions, and the impact of policy measures.
In addition, greater integration of various government data sources is likely to improve the quality, consistency, and reliability of India’s economic statistics. The initiative also aligns with the Union Budget 2026-27, which places significant emphasis on the services sector, while supporting the government’s long-term objective of increasing India’s share in global services exports to 10% by 2047.
Disclaimer: This article is for educational and informational purposes only and does not constitute investment advice or a recommendation to buy or sell any securities. The companies mentioned are cited as examples within the context of market developments. Investors are advised to conduct their own due diligence and consult their financial advisor before making any investment decisions.
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