The government has introduced a monthly Index of Services Production (ISP) to track India's formal services economy. Data for April shows 14 of 19 sub-sectors posted double-digit growth, led by food services and retail. Investors can now use this monthly metric to better assess the health of the sector that contributes approximately 60 percent to India's GDP.
The Ministry of Statistics and Programme Implementation (MoSPI) has officially rolled out the Index of Services Production (ISP), a new monthly indicator designed to capture the performance of India's formal services sector. With 2024-25 as its base year, the index provides a more granular view of the services economy, which remains the largest contributor to India’s gross domestic product.
Sector Performance Highlights
April data indicates significant momentum across most service-oriented businesses. The accommodation and food services segment recorded the strongest expansion at 37.2 percent, followed by retail trade at 30.8 percent and administrative support services at 28.7 percent. The real estate sector also saw notable growth, rising 27.7 percent. This data highlights robust consumer and business activity within these specific categories.
However, the index also captured areas of pressure. Air transport activity contracted by 13.9 percent in April, and the railway transport segment experienced a minor decline of 0.4 percent. These figures are important for investors monitoring logistics and travel-related companies, as they show that growth is not uniform across all transportation sub-segments.
Impact on Economic Monitoring
Previously, tracking the services sector on a monthly basis was challenging due to a reliance on quarterly GDP estimates or proxy indicators. By compiling the ISP using Goods and Services Tax (GST) returns and administrative records, MoSPI aims to provide more timely insights into formal enterprises. Because the index focuses specifically on the formal sector, it does not include informal services, which continue to play a large role in the broader economy.
For investors and market analysts, this index provides a new tool to identify trends in demand and operational efficiency within the services economy. Moving forward, the government plans to release the ISP on the 29th of each month. Future updates will be critical for assessing whether the strong growth observed in retail and hospitality is sustained or if higher interest rates and inflationary pressures begin to impact discretionary spending across these service categories.