Index of Service Production: NSO’s Monthly Services Gauge
Why in the news
The National Statistical Office floated a plan for a monthly Index of Service Production, so that the largest part of the economy can be tracked between quarterly GDP releases.
Key facts
- Index of Service Production (ISP): proposed by the NSO, with 2024-25 as base year.
- Services make up more than 50% of GVA; manufacturing already has IIP and farming has crop estimates.
- Output proxy: GST outward supplies, since services are consumed as they are produced.
- Price adjustment (deflation) will use sector-specific CPI and non-food CPI, as India has no full PPI.
- The first release will be a Trial Index to find methodological gaps.
How other economies compare
| Economy | Approach |
|---|---|
| India (proposed) | GST-based values, deflated with a mix of CPI proxies |
| United Kingdom | Monthly services index that feeds monthly GDP estimates |
| South Korea | Value indicators adjusted with sector-wise producer prices |
| European Union | Member states compile monthly indices to follow regional health |
The design follows standards laid down by the OECD and Eurostat.
Background
- Strip price effects out of turnover and you get real (volume) growth; this step is deflation.
- International guidance prefers Producer Price Indices, which capture prices at the provider’s level.
- A Service PPI, still being developed, would also reduce the heavy reliance on WPI for deflating GDP.
- A base year is a fixed comparison point that removes price change over time.
- The index would enable monthly GDP nowcasting, bringing India closer to advanced-economy practice.
Concerns
- Informal sector (street vendors, workshops, domestic help) is mostly outside the GST net and excluded at first.
- Data on real estate, professional services and retail trade are hard to aggregate; banking and telecom data are stronger.
- The index is a trial, not yet an official indicator.
Exam angle
- Proposed by: National Statistical Office; base year 2024-25.
- Main data source: GST outward supplies.
- Related terms: IIP, GVA, PPI, deflation, nowcasting.