Index of Service Production (ISP): Need, Methodology, Sectors and Importance

Learn about the Index of Service Production—its methodology, key sectors covered, and importance in measuring services sector performance in India.

Table of Contents

Context

The Ministry of Statistics and Programme Implementation (MoSPI) has released an ‘Approach Paper‘ outlining its plan to measure the output of India’s formal services sector every month through a new Index of Service Production (ISP).
The index will use 2024-25 as the base year and will rely heavily on GST Network data as a key input. Public comments on this proposal have been invited.
A Technical Advisory Committee on ISP (TAC-ISP) was formed in May 2025. It consisted of 24 experts. It has prepared the current approach paper after extensive discussions.

What is the Index of Service Production (ISP) and why is it needed

Currently, India publishes two key high-frequency (monthly) economic indicators:
- Index of Industrial Production (IIP) — measures monthly output of the industrial sector (manufacturing, mining, electricity).
- Consumer Price Index (CPI) — measures retail inflation and forms the basis of India’s headline inflation number.
Both are closely watched by policymakers, the RBI, and economists to understand the economy’s trajectory.
However, there is no equivalent monthly index for the services sector — a glaring gap given that services contribute more than half of India’s GDP and generate millions of jobs.

To understand services sector performance, policymakers and economists currently rely on the S&P Global’s HSBC Purchasing Managers’ Index (PMI).
However, the PMI is a survey-based sentiment index — it captures how businesses feel about activity, not what is actually being produced.
It does not measure actual output. The ISP is designed to fill this gap with hard, output-based data.

Index of Service Production (ISP) aims to track short-term movements in the services sector. It will be similar in concept to IIP, but for services.
It will be developed by the National Statistical Office (NSO).

The approach paper studies 40+ service sub-sectors, including:

To convert nominal output into real output (adjusted for price changes), a Producer Price Index (PPI) would ideally be used as it measures the prices received by producers.
However, since India does not yet have a comprehensive PPI, MoSPI plans to use non-food CPI and sub-sector-specific CPI as proxies in the interim.
DPIIT is currently working on revising the Wholesale Price Index (WPI) and developing a full Producer Price Index (PPI).
A Working Group has recommended methodologies for compiling PPIs for services sub-sectors like Banking, Insurance, Securities, Pensions, Air Transport, Railways, and Telecom.