Why in News

The Ministry of Statistics and Programme Implementation (MoSPI) released an Approach Paper proposing the creation of an Index of Service Production (ISP) — India’s first monthly index to measure output in the formal services sector. The ISP will function analogously to the Index of Industrial Production (IIP) for manufacturing. MoSPI has invited comments from stakeholders by May 5, 2026. The base year is 2024-25 and the primary data source will be the GST Network.

The Data Gap the ISP Fills

India’s current statistical architecture for measuring economic output has a significant gap:

Index What It Measures Frequency Exists?
IIP (Index of Industrial Production) Manufacturing, mining, electricity output Monthly ✅ Yes (MoSPI, since 1950)
WPI (Wholesale Price Index) Prices of manufactured goods Monthly ✅ Yes
CPI (Consumer Price Index) Consumer prices incl. services Monthly ✅ Yes
GDP (Services) Services sector output Quarterly (GVA) ✅ Yes — but only quarterly
ISP (Index of Service Production) Services sector output Monthly ❌ Proposed — does not exist yet

The problem: Services account for over 50% of India’s GDP — yet unlike manufacturing (IIP is released monthly within 6 weeks of the reference month), there is no monthly tracker for services output. Policymakers, RBI, and financial markets rely on surveys like the PMI Services (Purchasing Managers’ Index, from S&P Global) — a private sector survey — as the best monthly proxy for services activity.

ISP — Proposed Design

Feature Detail
Base year 2024-25
Frequency Monthly
Primary data source GST Network (GSTN) — largest real-time administrative dataset on formal sector activity
Secondary sources Administrative data (MCA21, banks, insurance data), ASISSE enterprise survey
Coverage Formal services sector — approximately 67% of total services GVA
Excluded Informal services; GST-exempt sectors (health, education, government services)

Sub-sectors Covered

  • Wholesale and retail trade
  • Transport and storage
  • Hotels and restaurants
  • Banking and financial services
  • Insurance
  • Real estate
  • Professional, scientific and technical services
  • Communications (telecom)
  • Arts, entertainment and recreation

Why GST Network is the Key Data Source

The GST Network (GSTN) — operational since July 2017 — contains monthly e-filing data on sales, purchases, and turnover for approximately 14 crore registered businesses. It is the most comprehensive real-time dataset on India’s formal economy. Using GSTN as the foundation allows the ISP to be compiled with a 6-8 week lag — comparable to the IIP’s turnaround time.

This is a significant methodological advance: previous services output measurement relied on surveys (slow, subject to non-response bias) or proxy indicators (electricity consumption, freight data). GSTN data is administrative — reported directly by businesses under legal obligation.

Significance for Economic Policy

Beneficiary How ISP Helps
RBI (Monetary Policy Committee) Monthly services data improves inflation and growth nowcasting — critical for rate decisions
Finance Ministry Better tracking of GST-eligible services for revenue forecasting
CSO/GDP estimation Reduces dependence on benchmark-and-indicator methodology for quarterly services GVA
Financial markets Replaces reliance on private PMI surveys with official government data
UPSC-relevant Monthly service sector data complements IIP for a more complete picture of India’s economic momentum

UPSC Relevance

Paper Angle
GS3 — Economy National income accounting; GDP measurement; IIP vs ISP; GVA vs GDP
GS2 — Governance MoSPI; statistical system; data-driven policymaking
GS3 — Economy GST Network; formalisation of economy; digital transaction data

Mains Keywords: Index of Service Production, ISP, MoSPI, Index of Industrial Production, IIP, services sector GDP, GST Network, national income accounting, services measurement, base year 2024-25

Facts Corner

Item Fact
Index name Index of Service Production (ISP)
Proposed by MoSPI (Ministry of Statistics and Programme Implementation)
Existing analogue Index of Industrial Production (IIP) — for manufacturing
Base year 2024-25
Primary data source GST Network (GSTN)
Coverage ~67% of services GVA (formal sector)
Excluded from ISP Informal services; health, education (GST-exempt)
Consultation deadline May 5, 2026
Services share of India GDP 50%+
IIP base year (current) 2011-12
PMI Services Private survey by S&P Global — currently best monthly proxy