Meaning
The Index of Service Production is a proposed high-frequency economic indicator to measure the real output of India’s services sector.
It is being developed by the Ministry of Statistics and Programme Implementation to track monthly changes in formal services activity, similar to how the Index of Industrial Production tracks industrial output.
The proposed base year is 2024–25. MoSPI released an approach paper on the index in April 2026 and invited comments from stakeholders.
Why It Is Needed
India already has the Index of Industrial Production for mining, manufacturing and electricity, but there is no comparable monthly output index for services.
This creates a major data gap because services contribute more than half of India’s GDP/GVA, generate large employment and drive sectors such as IT, finance, trade, transport, hospitality, communication, health and professional services. MoSPI’s approach paper notes that the services sector is the most dynamic and rapidly expanding segment of the economy and contributes over half of India’s GDP.
Without a services output index, policymakers rely on indirect indicators such as GST collections, PMI surveys, bank credit, air traffic, railway freight, telecom data and corporate results. These are useful, but they do not provide a direct official index of services production.
Proposed Design
The proposed index will initially focus on the formal services sector.
MoSPI has proposed using GST data as a key input because GST filings provide regular information on formal-sector service activity. The proposed base year for the index is 2024–25.
The index may cover important services such as:
- trade
- transport
- storage
- communication
- financial services
- real estate and professional services
- hospitality
- health and education services, where measurable data is available
Significance
The index will improve India’s ability to track the real economy.
Its importance lies in:
- giving a monthly picture of services-sector momentum
- improving GDP estimation and nowcasting
- helping RBI assess demand and inflation pressures
- supporting better fiscal and monetary policy decisions
- reducing dependence on survey-based private indicators
- improving understanding of formal services growth
- helping compare industrial and services performance more accurately
For a services-led economy like India, a timely services index can become as important as IIP.
Difference from IIP
The Index of Industrial Production measures output in mining, manufacturing and electricity.
The Index of Service Production will measure output in the services sector.
IIP is based mainly on physical production data, while the services index will likely depend more on administrative and transaction data such as GST records because services do not always have physical output units like tonnes, units or megawatts.
Limitations
The biggest limitation is that the proposed index may initially capture only the formal services sector. India’s informal services economy is large, especially in retail trade, transport, repair services, personal services, small hospitality units and local businesses.
Other challenges include:
- GST data may reflect value and tax compliance, not pure real output
- separating price effects from volume growth may be difficult
- informal services may remain under-represented
- data quality and classification issues may affect accuracy
- services output is harder to measure than industrial production
- frequent revisions may be needed as methodology improves
Current Relevance
The index is important because India is trying to modernise its statistical system. Along with the proposed Index of Service Production, India is also updating other macroeconomic datasets such as CPI and GDP base years.
A reliable services index will help capture structural changes in the Indian economy, especially the rise of digital services, fintech, logistics, professional services, platform economy and organised retail.
Conclusion
The Index of Service Production is a proposed monthly indicator to measure India’s formal services-sector output with 2024–25 as the base year. It is important because services now dominate India’s economy, but official high-frequency measurement remains weak.
If designed well, the index can improve policymaking, GDP estimation, economic forecasting and understanding of India’s services-led growth. Its main challenge will be capturing real output accurately in a sector that is diverse, partly informal and difficult to measure through physical production data.
