India’s New Services Index: Measuring Turnover, Not Output

India now has a monthly measure of services activity—or something close to one. On 14 July, the Ministry of Statistics and Programme Implementation (MoSPI) released the first trial Index of Services Production (ISP) with the base year 2024–25. The reference month for the index was April 2026.

“The ISP is India’s first high-frequency indicator dedicated to measuring services sector output. It tracks short-term changes in the volume of output produced by the formal services sector relative to a specified base year,” says a press statement issued by MoSPI.

The case for introducing the ISP at this time rests on improved data availability. Goods and Services Tax (GST) returns and the Annual Survey of Incorporated Services Sector Enterprises (ASISSE) provide monthly turnover data and usable weights that did not exist a decade ago. The need for such an index also stems from the growing importance of the services sector, which has contributed more than half of India’s Gross Value Added (GVA) since FY2014 and now accounts for nearly 55 per cent of the economy.

The conceptual and methodological framework for the ISP was developed by a Technical Advisory Committee chaired by Debjani Ghosh, Distinguished Fellow at NITI Aayog. The committee’s report was released on 7 July 2026 after more than a year of deliberations.

An overall services production index will follow only after the stability of the trial series has been assessed and its coverage widened. At present, the 19 sub-sectors covered account for roughly 60 per cent of the formal services economy. These include trade, transport, hospitality, telecommunications, banking, insurance, real estate, IT, and professional services. The index draws on administrative records for air transport, railways, banking, and insurance, GST returns for most other sectors, and ASISSE for assigning weights.

The Index of Industrial Production (IIP) has traditionally been used to track short-term changes in economic activity driven by the manufacturing sector. According to the government, the growing importance of the services sector necessitates a similar high-frequency measure to track economic activity in services as well.

As a policy tool, the ISP appears promising, but its usefulness comes with several caveats.

First, for sub-sectors where GST returns are used—including trade, transport, telecommunications, real estate, IT, professional services, and hospitality—the index is built on reported gross turnover rather than value added. This creates the risk of double counting. A lengthening supply chain can increase turnover without a corresponding increase in actual output, as the same value may be counted multiple times along the production chain. Similarly, changes in tax administration—such as a lower e-invoicing threshold, GST rate rationalisation, or stricter enforcement—may push the index upward. In such cases, it becomes difficult to distinguish between a compliance-driven increase and genuine growth in output.

Second, movements in the informal sector may skew the results. Since only GST-registered firms are included, a rising sub-sectoral index may simply reflect a shift in market share from informal to formal firms rather than an increase in total output. Likewise, if formal sector firms weather an economic downturn better than informal firms, an index based only on the formal sector may understate the overall contraction. This limitation is likely to be most significant in labour-intensive segments where informal employment continues to dominate.

Third is the volume problem. The ISP is intended to track changes in output volume, but the underlying data is collected in value terms and therefore reflects both price and quantity. MoSPI addresses this by using deflators—the Wholesale Price Index (WPI) for wholesale trade and CPI-based deflators for other sectors. However, these are broad proxies rather than sector-specific service price indices. Moreover, services are inherently difficult to deflate because they are labour-intensive, wages are relatively sticky, and productivity growth is difficult to measure. A rise in IT billings, for instance, may reflect higher billing rates rather than an increase in the volume of work performed.

Fourth, there are reconciliation issues. The three primary data sources—GST returns, administrative records, and ASISSE—operate on different frequencies and use different definitions of output. Aligning monthly estimates with quarterly and annual national accounts is therefore likely to require repeated revisions before the series stabilises.

Until then, the ISP should be interpreted as a directional indicator—a proxy for the formal services sector rather than a precise measure of the entire services economy. Nevertheless, it represents a significant statistical advancement, reducing the need to rely solely on GDP estimates when assessing short-term economic activity or informing monetary and fiscal policy decisions. Similar services production indices in advanced economies—including Britain’s Index of Services, Japan’s Tertiary Industry Activity Index, and the euro area’s Services Production Index—also took time to gain credibility and widespread acceptance.

India’s ISP is expected to follow a similar path.
India’s too is expected to get there.