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April 28.2026
2 Minutes Read

New Index of Service Production: A Game-Changer for India's Economy

Govt Mulls New Index 'ISP' To Track Services Production In Formal Sector; Releases Approach Paper

Understanding the Need for an Index of Service Production

The services sector is a powerhouse of the Indian economy, contributing over fifty percent to the GDP and employing millions across various fields—everything from retail and transport to finance and hospitality. Yet, despite its significance, this vital segment has been operating in a data void, lacking a dedicated Index of Service Production (ISP) to measure its short-term performance. The Ministry of Statistics and Programme Implementation (MoSPI) has now recognized this crucial gap and is preparing to launch an ISP to track and analyze the service sector more effectively.

What Is the Proposed ISP and Its Methodology?

MoSPI's approach paper outlines plans to create a comprehensive ISP using aggregated Goods and Services Tax (GST) data. This will serve as a benchmark for economic activity within the services sector. The proposed index will evaluate over 40 subsectors, including trade, transport, banking, and entertainment. Moreover, it addresses data collection challenges by proposing the use of administrative data, which enables confidentiality while allowing for a thorough analysis of service sector performance.

International Standards Guiding India's ISP

The ISP will not only fill a local data gap but align with international best practices for economic measurement. This alignment is crucial, as India seeks to position itself more prominently on the global economic stage. By adopting these international standards, policymakers will gain better tools to assess the economic landscape, facilitating more informed decision-making.

The Role of GST Data in Tracking Economic Trends

Since its implementation in July 2017, GST has transformed how economic data is analyzed in India. It provides a consistent framework for collecting information on production and outward supplies across various sectors. The MoSPI's plan to leverage this existing data stream aims to streamline the compilation of the ISP while ensuring the protection of individual businesses' confidentiality.

Potential Impact of the ISP on Policymaking

The absence of a reliable ISP has left policymakers often relying on sentiment-based indices like the S&P Global's Purchasing Managers' Index (PMI), which does not accurately reflect actual output. With a dedicated ISP, policymakers could get real-time insights into service sector dynamics, enabling them to tailor fiscal and economic policies more effectively. This proactive approach could further catalyze India's economic transformation by supporting sectors that are performing well while addressing those that require assistance.

Stakeholder Engagement: Inviting Feedback

The MoSPI is currently inviting experts, policymakers, and industry stakeholders to review the approach paper and suggest improvements by May 5, 2026. This collaborative effort is essential, as engaging a diverse range of opinions can enhance the proposed ISP's robustness. The success of such initiatives lies in their ability to adapt to the real-world complexities of economic data collection and interpretation.

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