The Ministry of Statistics and Programme Implementation (MoSPI) has released an approach paper for the compilation of the Index of Service Production (ISP), marking a pivotal shift in India’s economic monitoring.
While the Index of Industrial Production (IIP) has long tracked manufacturing, a comparable high-frequency indicator for services, which contributes over 50% of India’s GVA, has been absent. The new ISP aims to bridge this gap by providing monthly and quarterly indices for the formal service sector, leveraging the massive data trail created by GST and increased digitalization.
The proposed ISP is designed to cover at least 70% of the service sector at the 2-digit NIC (National Industrial Classification) level.
The methodology moves away from sporadic surveys toward a "Tri-Source" data model: GST turnover data for market services, administrative records for banking and insurance, and the new Annual Survey of Incorporated Services Sector Enterprises (ASISSE) for health and education. To ensure accuracy, the paper emphasises the development of Service Producer Price Indices (SPPIs) to deflate nominal turnover into real volume terms, with 2024-25 proposed as the base year to align with stabilized GST data.
Key Methodological and Structural Benchmarks
Target Coverage: Aiming for 70% of total service GVA; current trial efforts are significantly higher than the 20% coverage achieved in 2004.
Base Year: Proposed as 2024-25, ensuring alignment with modern GST compliance and digital administrative records.
Primary Data Lever: GST returns will serve as the lead indicator for most market services (Trade, Transport, Hospitality).
Deflation Strategy: Heavy reliance on Producer Price Indices (PPI) and CPI to convert gross turnover into volume-based indices.
Excluded Segments: Public administration, informal sector enterprises (below GST threshold), and certain exempted services (approx. 33% of GVA).
Aggregation: Sub-sectoral ISPs will be aggregated using GVA shares as weights, mirroring the structure of the IIP.
What is the "Index of Service Production (ISP)"?
The Index of Service Production (ISP) is a short-term economic indicator that measures the monthly changes in the volume of output produced by the service sector. If the IIP tells us how many cars or tons of steel were produced, the ISP tells us the "volume" of services provided, such as hotel stays, banking transactions, or transport kilometers. Because "services" are intangible, the ISP usually takes the total money earned (turnover) and "deflates" it by removing the effect of price changes (inflation) to find the actual growth in activity.
Policy Relevance
Enables Real-Time Policy Calibration: Currently, policymakers rely on lagged quarterly GVA data; a monthly ISP allows for immediate interventions in sectors like trade or transport during economic volatility.
Foundational for 'Viksit Bharat' Planning: As India transitions to a services-led $30 trillion economy, the ISP provides the granular data needed to identify which service sub-sectors (e.g., IT vs. Hospitality) are driving growth.
Improves National Accounts Accuracy: Monthly ISP data will significantly reduce the "revisions" seen in GDP estimates by providing a more reliable proxy for the quarterly and annual GVA of the formal sector.
Leverages the 'GST Dividend': By using GST data as a proxy for production, the government is effectively monetizing its Digital Public Infrastructure to create high-quality statistical insights at zero additional survey cost.
Benchmarks Global Competitiveness: Aligning with OECD and Eurostat standards ensures that India’s economic data is comparable to advanced economies like South Korea and the UK, enhancing investor confidence.
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