India’s formal services sector output grew by 9.8% in May, significantly lower than the 20.8% growth recorded in April. Only 8 out of 19 sub-sectors managed double-digit growth, with air transport and broadcasting facing declines. This slowdown in formal services reflects broader pressures in retail trade and IT, though economists remain optimistic about the overall quarterly trend.
India’s services sector saw a noticeable moderation in output during May 2026, according to the Sub-Sectoral Trial Index of Services Production (ISP). The headline growth figure for the month stood at 9.8%, a sharp cooling compared to the 20.8% growth registered in April. This data, published by the Ministry of Statistics on an experimental basis, tracks formal sector enterprises using GST and administrative records, covering roughly 60% of the total services economy.
Performance Across Sub-Sectors
The moderation was widespread, with only 8 of the 19 tracked sub-sectors achieving double-digit growth in May, down from 14 in the previous month. The accommodation and food segment, while maintaining its position as a growth leader, saw its expansion rate slip to 27.4% from 37.2% in April. Meanwhile, certain segments faced contraction, specifically postal and courier services, information and broadcasting, and air transport. The decline in air transport marks the second consecutive month of negative growth, a trend likely tied to elevated fuel prices and global geopolitical disruptions affecting travel.
In contrast, some areas showed signs of recovery. Railway transport, which had previously faced a decline, returned to positive growth territory in May. Other key segments such as real estate, retail trade, and banking continued to support the overall index with double-digit expansion.
Economic Context and Investor Monitorables
Economists have pointed to slower growth in key areas like retail trade, road transport, IT, and administrative support services as primary drivers behind the monthly moderation. Despite this deceleration, the average growth for eight major services—which account for approximately 87% of the index’s total weight—remained at 10.3% for the month.
For investors, the primary indicator to follow remains the consistency of this data as the Ministry refines the ISP. While the formal sector has shown resilience, the index does not account for the informal economy or core government services. Future updates will be critical to observe whether this slowdown is a temporary monthly fluctuation or a sustained trend in demand for IT and administrative services. Analysts remain focused on the broader April-June quarter performance, where positive trends in the Index of Industrial Production (IIP) are expected to complement the services sector to maintain overall economic momentum.