India will introduce its first Index of Services Production (ISP) on July 14, using 2024-25 as the base year to track short-term economic momentum. This new indicator is significant because the services sector accounts for over 50% of India's Gross Value Added (GVA). The index will initially focus on organized services like trade, transport, and banking, while excluding health and education until further data becomes available.
The Ministry of Statistics and Programme Implementation is preparing to launch a new high-frequency indicator, the Index of Services Production (ISP), on July 14. This move is designed to provide a more accurate and timely view of the services sector, which has become the primary driver of India’s economic growth, contributing more than half of the national Gross Value Added (GVA).
Understanding the New Economic Indicator
Currently, policymakers and investors rely heavily on the Index of Industrial Production (IIP) to track manufacturing and mining activity. However, because the services sector has expanded rapidly, IIP data often fails to capture the full health of the economy. The new ISP aims to fill this gap by providing monthly updates on services activity. The base year for this new index will be 2024-25, which will serve as the benchmark for measuring future growth.
Scope and What is Included
The initial version of the index will track major service-oriented industries where data is more readily available. This includes trade, transportation, telecommunications, accommodation, entertainment, and real estate. By utilizing data from the Goods and Services Tax Network (GSTN), alongside specific reports from railways, aviation, banking, and insurance regulators, the government hopes to create a reliable pulse for the sector.
Investors should note that the index is not yet comprehensive. Public services such as health, education, defence, and public administration are currently excluded. Furthermore, a large portion of India’s informal services sector is also left out of this initial calculation. These areas are expected to be added in future versions once the government concludes the Annual Survey of Incorporated Services Sector Enterprises (ASISSE).
Impact on Policy and Market Monitoring
A panel led by NITI Aayog member Debjani Ghosh has recommended that this index be released on a trial basis to allow for stakeholder feedback. The government intends to publish the index with a lag of approximately 60 days following the end of each month. Beyond this, the panel is also working on a formal roadmap to better measure the digital economy, which represents an increasingly large share of corporate India.
For market participants, the ISP will serve as an additional tool to monitor economic cycles. As more granular data on sub-sectors becomes available, investors may gain better insights into consumer spending trends and corporate performance across different service industries. The next key update to watch for will be the quality of the trial data and how quickly the government incorporates the currently excluded sectors into the final index.