India creates an index to track the services economy, like IIP for manufacturing

India Launches Monthly Services Sector Index to Track Economic Growth

India creates an index to track - India has taken a significant step in enhancing economic monitoring by introducing a new monthly index — the Index of Services Production (ISP) — to track the performance of its services sector. This initiative, aimed at providing real-time data, is designed to mirror the function of the Index of Industrial Production (IIP) for manufacturing, offering policymakers and analysts a more frequent and precise measure of economic activity. With services contributing over 50% to India’s GDP, the ISP is expected to shed light on sectoral trends, enabling timely decision-making and improved economic forecasting.

A Comprehensive Tool for Economic Insight

The ISP, launched in a trial phase, focuses on formal services such as banking, insurance, and transportation, providing direct insights into real output. Officials emphasize that this index will complement existing metrics like GST collections and Purchasing Managers’ Index (PMI) readings, which currently offer a less granular view. By tracking monthly performance, the ISP aims to offer a clearer picture of the services sector’s dynamics, which are often overlooked in quarterly GDP reports. This shift could enhance the accuracy of economic analysis and support more responsive policy frameworks.

“India is today predominantly a services economy, even as we continue working towards a more balanced economic structure with a stronger manufacturing base. From today onwards, we will, for the first time, be able to observe the country’s largest sector on a monthly basis,” said V. Anantha Nageswaran, chief economic adviser.

Experts suggest that the ISP’s data will be critical for understanding shifts within the services industry. For instance, the index captures growth in diverse sub-sectors, such as retail and real estate, while also highlighting challenges in areas like air transport. This granular approach allows for better assessment of sectoral contributions to GDP and informs targeted interventions. The trial results, which used the 2024-25 base year, show promising growth in 14 out of 19 sub-sectors, underscoring the potential of the