An Approach Paper on Expanding the scope and coverage for the Index of Services Production

1. At a Glance

• Index of Services Production (ISP) is a short-term indicator that measures how the volume of real output of the services sector changes against a fixed base period. It is the services counterpart of the IIP [2].
• On 06 Oct 2026, MoSPI released an Approach Paper proposing to add Education, Human Health & Residential Care and Public Administration & Defence to the monthly ISP. Together these make up about 21% of services GVA (2024–25) [1].
• Adding them would raise ISP coverage from about 60% to about 80% of services-sector GVA. The sub-indices could then be combined into one all-India ISP [1].
• Why it matters for UPSC: services contribute over 50% of GVA, and have done so since 2013-14 [2]. Until now India had no monthly high-frequency measure of the sector. The topic links to GS-III (growth, measurement) and to statistical reform.

2. Why in the News

• 06 Oct 2026: PIB/MoSPI published the "Approach paper on Expanding the scope and coverage for the Index of Services Production" and invited comments [1].
• Comments are invited from experts, academicians, Central ministries and departments, State governments, financial institutions and other stakeholders. The deadline is 16 Oct 2026 [1].
• July 2026: MoSPI began compiling a monthly ISP for the formal sector, base year 2024–25, on a trial basis [1].

3. Background & Evolution

• Why India had no ISP earlier [2]:
• Few administrative datasets covered service industries.
• Service activities are varied, so each needs its own output indicator.

• Suitable service-sector price indices for deflation were not available.

• 2004: OECD invited paper on developing an ISP manual (UN Digital Library) [6].

• 2004: First TAC-ISP constituted; reconstituted in 2010 under Prof. C.P. Chandrashekhar (JNU) [3][4].
• Aug 2006 – Feb 2019: That TAC met and consulted stakeholders. It submitted its report in June 2019 [3].

• It could recommend methods for only 7 sub-sectors: Air Transport, Railways, Postal, Telecom, Education, Banking and Insurance [3].

• 2007: OECD published the Compilation Manual for an Index of Services Production. This is the main international guideline [5][3].

• What made an ISP feasible now [2][3][4]:
• High-frequency GST outward-supply data became available.
• MoSPI launched ASISSE, the Annual Survey of Incorporated Services Sector Enterprises.

• A new CPI (base 2024), released Feb 2026, covers services better [4].

• May 2025: New TAC-ISP constituted, chaired by Ms. Debjani Ghosh, Distinguished Fellow, NITI Aayog [3].

• Its ToR included expanding ISP scope and exploring a Digital Economy index [3].

• 5–9 Jan 2026: An IMF Technical Assistance Mission to MoSPI discussed how to use GST data for ISP [4].

• 2026: MoSPI released a first approach paper on compiling ISP for the formal sector for public consultation. The TAC-ISP report drew on it [3][4].
• 2026-27: First full-fledged ASISSE begins [4].
• July 2026: Trial monthly ISP launched with 19 sub-sectors [1].
• Oct 2026: Approach paper on expanding coverage released [1].

4. Core Static Facts

Parameter	Fact
Nodal body	MoSPI, Economic Statistics Division (ESD) [1][3]
Base year	2024–25. It is recent and a "normal" year, and aligns with the CPI base 2024 [2]
Classification	NIC 2025, compiled at the 2-digit level [3]
Formula	Fixed-weight Laspeyres volume index [2][3]
Weights	Sectoral GVA shares from National Accounts Statistics [2]
Frequency / lag	Monthly, with a lag of about 60 days [2][3]
Current coverage	19 broad sub-sectors, about 60% of services GVA [1]
Proposed addition	Education; Human Health & Residential Care; Public Administration & Defence. About 21% of services GVA [1]
Target coverage	About 80% of services GVA [1]
Sector	Formal sector only. ISP is built from GST-registered enterprises, so the informal sector is not covered [2]

Data sources (three pillars) [2]

• Administrative data: Air Transport, Railway Transport, Banking, Insurance.
• GST data (GSTR-1 outward supplies, SAC-wise taxable value): the other 15 sub-sectors, such as trade, road and water transport, telecom, IT services, real estate, and professional and administrative services.
• ASISSE: Health and Education, excluding government providers.

Key terms

• SAC (Service Accounting Code): the services classification under GST. It is a CBIC adaptation of the UN Central Product Classification (CPC). SAC codes are mapped to NIC codes [2].
• Quantity-based indicators measure output in physical units, e.g. passenger-km. Only Air Transport and Railways use them [2].
• Value-based indicators use turnover, sales or outward supplies, and must be deflated to get real output [2].

Deflators [2]

• WPI for Wholesale trade.
• Sector-specific CPI where available, e.g. CPI (communications) for Telecom.
• CPI General for Banking and Insurance.
• CPI Non-Food everywhere else.
• SPPI (Services Producer Price Index) is the international preference but is not used. It exists for only 5 sub-sectors and is quarterly, with a 60-day lag.

Largest weights among the 19 sub-sectors [3]

• Information & computer-related services: 21.91%
• Retail Trade: 18.49%
• Administrative & support services: 14.39%
• Banking: 10.74%
• Road Transport: 7.49%
• Wholesale Trade: 6.41%

Excluded from the present ISP [2]

• Public administration & defence
• Other financial services (e.g. central bank activities, money market funds)
• Social work without accommodation
• Membership organisations
• Personal services
• Private households as employers
• Extraterritorial organisations
• Government health and education
• Gambling and betting

5. Multi-Dimensional Analysis

Economic

• Services contribute more than half of GVA, yet short-term tracking has relied on the IIP. ISP fills this gap and supports business-cycle analysis and forecasting [2][1].
• Quarterly GVA for services is published only as three aggregated groups. A monthly sub-sectoral index would give earlier, more detailed signals [4].
• The heavy weights on IT services (21.91%) and retail (18.49%) mean that headline ISP movements will be driven by these segments [3].

Scientific / Technological (statistical methodology)

• This is the first statistical use of GST data. That is why the indices are released as trials first, to check that they are stable [2].
• MoSPI receives only aggregated SAC-level data from GSTN. It neither has nor needs unit-level data, which protects taxpayer confidentiality [2].
• Turnover is a good proxy for output because services are consumed as they are produced and build up no inventory [2].
• Using CPI as a deflator is justified because, for services, SPPI and CPI differ mainly by tax margins. Over 80% of CPI non-food inflation comes from services or cost-push items [2].

Administrative / Governance

• Coverage gaps exist because core government work and non-market services have no market turnover, and GST-exempt services (health, education) leave no GST trail [1][2].
• The expansion depends on ASISSE, whose first full round starts only in 2026-27. Government sectors will also need data from ministries and States [4][1].
• MoSPI is consulting stakeholders, including State governments, before adopting the methodology [1].

Social

• Education and health are key to human development but GST-exempt. Without them, the ISP under-represents social-sector services [1][2].
• Because ISP covers only the formal sector, informal service employment (a large share of jobs) is not reflected [2].

International / Comparative

• The method follows the OECD Manual (2007) and the Eurostat guide [3][5].
• Peer indices [4]:
• EU: monthly Services Production Index coordinated by Eurostat.
• UK: Monthly Index of Services, which feeds monthly GDP.
• South Korea: Service Industry Activity Index.

6. Recent Developments (last 12–18 months)

• May 2025: TAC-ISP reconstituted under Debjani Ghosh (NITI Aayog) [3].
• 5–9 Jan 2026: IMF Technical Assistance Mission on using GST data for ISP [4].
• Feb 2026: New CPI series (base 2024) released, with better coverage of services [4].
• 2026: Approach paper on compiling ISP for the formal sector released for consultation. TAC-ISP report finalised (hosted on PIB, July 2026) [3][4].
• July 2026: Trial monthly ISP launched: base year 2024–25, 19 sub-sectors, about 60% GVA coverage [1].
• 2026-27: First full-fledged ASISSE starts [4].
• 06 Oct 2026: Approach paper on expanding ISP coverage released. Comments due 16 Oct 2026 [1].

7. Prelims Hooks

• ISP is compiled by MoSPI, not NITI Aayog or RBI [1].
• The current TAC-ISP is chaired by Debjani Ghosh, NITI Aayog. It was constituted in May 2025 [3].
• The first TAC-ISP was set up in 2004, reconstituted in 2010 under Prof. C.P. Chandrashekhar, and reported in June 2019 [3].
• Base year of the trial ISP is 2024–25 [1].
• ISP uses NIC 2025 [3].
• Compilation formula: fixed-weight Laspeyres volume index [2].
• Weights are GVA shares from National Accounts Statistics [2].
• Released monthly with about a 60-day lag [2].
• The trial ISP covers 19 sub-sectors, about 60% of services GVA [1].
• The expansion adds Education, Health & Residential Care, and Public Administration & Defence (about 21%), taking coverage to about 80% [1].
• Only Air Transport and Railways use quantity-based indicators [2].
• SAC is CBIC's GST services classification, based on the UN CPC [2].
• GST input comes from GSTR-1 outward-supply taxable values [2].
• The default deflator is CPI Non-Food. WPI is used only for wholesale trade [2].
• The largest weight is Information & computer-related services (21.91%) [3].
• The international reference is the OECD Compilation Manual for an ISP (2007) [5].

8. What the 80% Coverage Still Leaves Out

• About one-fifth of services will still be outside the index
• The TAC report found that the sub-sectors left out of ISP made up nearly 33% of services GVA (Gross Value Added: the value a sector adds after subtracting what it buys from others) [3].
• The new proposal brings back about 21%. Coverage rises from about 60% to about 80%, so about 20% stays out [1].

• Ownership of dwellings, personal services, social work and household employers are among those still excluded [3].

• "80% coverage" counts sectors, not the firms the data actually sees

• The 80% figure adds up the GVA weights of the sub-sectors that are included [1].
• Inside each sub-sector, though, the data comes only from GST-registered firms.
• Service businesses with turnover below ₹20 lakh (₹10 lakh in Manipur, Mizoram, Nagaland and Tripura) do not have to register [3].

• So a small tailor, tutor or repair shop sits inside a "covered" sector but never enters the data.

• The survey fix has the same blind spot

• Health and Education are meant to come from ASISSE, because they are GST-exempt [2].
• But the ASISSE sample is itself drawn from the GSTN list of firms, and it covers only incorporated (company-type) enterprises [3].
• So switching from GST to ASISSE does not reach the informal clinic or coaching centre either. The TAC therefore calls ISP a formal-sector index [3].

9. Why Measuring a Government Office Is So Hard

• Public administration and defence sell nothing, so there is no turnover to count
• The TAC excluded Public administration & Defence because its services are non-market (given free, not sold) and are exempt from GST [3].

• ISP's main method is turnover (sales value) adjusted for prices. That method has nothing to work with here.

• The only fallback is the method international manuals like least

• The OECD Manual and the Eurostat guide rank indicators in this order: turnover-based first, then volume-based, then input-based [3].
• Input-based means measuring output by what goes in, such as staff numbers or salaries.
• The problem: if a ministry hires more staff, "output" goes up, even if no extra work gets done. If an office goes digital and serves more citizens with fewer staff, "output" goes down.

• Unless the new paper finds direct counts of what the sector produces, this addition will rest on the weakest kind of indicator. The paper itself still needs to be checked on this point (see the note's sourcing caveat).

• A monthly index fed by an annual survey

• The TAC said Health and Education indicators from ASISSE would have annual or quarterly frequency, depending on when the data arrives [3].
• ASISSE results may come more than a year after the survey [3].

• So in a "monthly" ISP, these sectors may move only once a quarter or once a year. Between updates, their numbers have to be filled in by estimation.

• The weight may be bigger than what is measured

• The ISP weights for these sectors come from their full share of GVA, government included [2].
• But government health and education providers are excluded from the ASISSE-based index [2].
• If the expansion keeps this design, private hospitals and schools would stand in for the whole sector, including government ones.

10. The Hidden Assumptions in Turning Sales into Real Output

• Using CPI as the price tool works only if GST rates stay fixed
• A producer price (SPPI) leaves out sales taxes. A consumer price (CPI) includes them [3].
• The TAC accepted CPI as a substitute because, under GST, tax rates stay "constant for a considerably long period" [3].

• So if the GST rate on a service changes, CPI moves even though the producer's price has not. The index would then show a fall or rise in "real output" that never happened.

• CPI tracks what households pay, but many services are sold to businesses

• CPI Non-Food is the default deflator (the price index used to remove inflation from sales figures) [2].
• Administrative & support services carry a 14.39% weight [3]. These are mostly bought by firms, and CPI does not track the prices firms pay.

• The TAC itself asked for SPPIs to replace these stand-in deflators to make the index more accurate [3].

• Sales are not the same as value added

• GST outward supplies show gross sales, which include the cost of inputs a firm buys [2].
• ISP weights, however, are based on GVA [2].

• If firms start buying more inputs, for example by outsourcing, sales rise faster than value added. ISP growth would then run ahead of GVA growth.

• The weights are temporary for now

• Until ASISSE supplies GVA at the NIC 2/3/4-digit level, weights inside each broad sector use GST turnover shares, not GVA [3].
• So in the early series, high-sales, low-margin activities count for more than they should.

11. How to Read a Monthly ISP Number

• Expect revisions: treat early prints as provisional
• The FAQ says GST data are being used for statistics for the first time, which is why ISP is released only on a trial basis [2].

• The TAC found GST data for some sub-sectors "very volatile". It said these may have to be grouped together before release [3].

• More GST registrations can look like more output

• ISP uses the universe approach: it takes every GST filer each month, not a fixed sample of firms like the IIP [3].
• The TAC liked this because it adjusts by itself as firms open and close [3].

• The catch: when an existing informal business registers for GST, its sales enter the data for the first time. The index may show growth that is really formalisation (businesses joining the tax net), not new production.

• A few sectors drive the headline

• IT services (21.91%) and retail (18.49%) together carry about 40% of the weight [3].

• Before reading a strong month as "services are booming", check whether only these two moved.

• Banking and insurance mix monthly and quarterly data

• Some of their inputs arrive only every quarter, so the TAC asked MoSPI to build a special way to estimate the monthly figure [3].
• The monthly figure for these sectors is therefore partly estimated.

12. Is a Rough Index Better Than No Index?

• The strongest case against releasing it now
• The index relies on substitute price indices, interim weights, formal-sector-only data and, soon, input-based government figures (see above).
• RBI and the Finance Ministry use high-frequency indicators to make policy [3]. A monthly number that looks precise could push them the wrong way.

• Government output measured by inputs tends to rise steadily with salaries and hiring. Adding it could make the headline ISP look smoother and stronger than market services really are.

• The answer: yes, a rough index is better, if it is clearly labelled

• The TAC openly accepted these limits. It concluded that a trial release "was more appropriate than continuing without an ISP" [3].
• Today, quarterly GVA shows services only as three broad groups [4]. Even a rough monthly breakdown tells policymakers more than that.
• The critics are right on one point: market and non-market parts should not be mixed into a single number without showing each part separately. A combined all-India ISP [1] will be useful only if its sub-indices are published alongside it.

13. Who Must Do What Next

• DPIIT should build SPPIs for all major service sub-sectors
• The TAC made exactly this recommendation [3].

• SPPIs would reduce dependence on CPI and WPI, and make ISP comparable with other countries' indices [3].

• MoSPI should test its deflators against SPPI and publish the gap

• The TAC asked MoSPI to compile quarterly ISPs internally using both CPI and SPPI for telecom, banking and insurance, and to compare the results [3].

• Publishing that comparison would show users how much the deflator choice changes the numbers.

• Line ministries should collect monthly output data

• The TAC asked line ministries and departments to fill the data gaps listed in its Annexure III, and to set up monthly data collection [3].

• For public administration, health and education, this is the only route away from input-based measurement.

• MoSPI should add an informal-sector component

• The TAC recommended using the TAC-IIP method for an unincorporated-sector index in services too [3].
• Until that is done, ISP should be read as tracking formal services only.

14. Anchors for Answers

• Data: Services were about 52.9% of India's GVA in 2024-25 [3]. Sub-sectors excluded from ISP made up nearly 33% of services GVA [3]. The expansion adds about 21%, taking coverage to about 80% [1].
• Data: GST registration is not compulsory for service businesses below ₹20 lakh turnover (₹10 lakh in four north-eastern States), so these firms are outside ISP data [3].
• Data: Monthly GST data arrive with a lag of about 45 days. DPIIT's SPPI comes quarterly with a lag of about 55 days [3].
• Report/Committee: TAC-ISP Report (Chair: Debjani Ghosh, submitted 1 July 2026). It recommends a universe approach, CPI-based deflators as an interim measure, SPPI expansion by DPIIT, and a phased, ASISSE-based route for Health and Education [3].
• Report/Committee: Sub-committee on Methodological Improvement for the GDP base revision (base 2022-23). It is the basis for using CPI General as the deflator for banking and insurance [2].
• Comparison: OECD Compilation Manual (2007) and Eurostat guide: turnover-based indicators first, volume-based second, input-based last [3][5]. UK Monthly Index of Services feeds into monthly GDP [4].

15. Mains Relevance

• GS-III: Indian Economy – planning, mobilisation of resources, growth, development and employment; measurement of economic growth.
• GS-II: Government policies and interventions (statistical governance; Centre–State data sharing).

Possible question stems

1. "Despite contributing over half of GVA, India's services sector lacked a high-frequency output indicator until recently. Examine the methodological challenges in compiling an Index of Services Production and how recent data reforms address them." (15 marks)
2. "Discuss the potential and limitations of using GST data for official statistics in India, with reference to the Index of Services Production." (10 marks)
3. "Measuring non-market services such as public administration, health and education poses unique conceptual problems. Critically analyse." (15 marks)

16. Related Topics to Study Next

• Index of Industrial Production (IIP): the counterpart index that ISP complements [2].
• GDP base-year revision (2022-23): the related sub-committee report shaped ISP's deflator choices [2].
• New CPI series (base 2024): the main source of ISP deflators [4].
• ASISSE: the data source for the health and education indices [2][4].
• GST and GSTN data architecture (SAC, GSTR-1): the core input for 15 sub-sectors [2].
• National Industrial Classification 2025: the classification framework [3].
• SPPI (Services Producer Price Index): the international best-practice deflator, and why India does not use it yet [2].
• Digital Economy Index: part of TAC-ISP's mandate, with a separate report planned [3].

17. NCERT Concepts to Revise

• Index of Industrial Production (Economy): ISP is the services counterpart of IIP; both are monthly Laspeyres volume indices with GVA-based weights.
• Gross Value Added (Economy): Coverage (60% to 80%) and index weights are measured as shares of services GVA.
• Goods and Services Tax (Economy): GST outward-supply data feeds 15 sub-sectors; GST-exempt health and education need a survey instead.
• Consumer Price Index (Economy): CPI Non-Food is the default deflator that converts sales values into real output.
• Producer Price Index (Economy): SPPI is the preferred deflator internationally, but India lacks it for most services.
• Unorganised sector (Economy): ISP covers only formal GST-registered firms, so informal service activity and jobs are missed.

18. Common Errors / Trap Areas

• Agency: the TAC-ISP chair is from NITI Aayog, but the index is MoSPI's. The earlier TAC chair was Prof. C.P. Chandrashekhar, not the current one [3].
• Coverage numbers: 60% is the current coverage, 21% is the share being added, and 80% is the target. These are shares of services GVA, not GDP [1].
• Base year: ISP uses 2024–25, while the new CPI uses 2024 (calendar year). Don't mix them up with the GDP base year 2022-23 [2].
• Data sources: Banking and Insurance come from administrative data, not GST. Health and Education come from ASISSE, because they are GST-exempt [2].
• Formula and deflator: ISP uses Laspeyres (not Fisher or Paasche). The default deflator is CPI Non-Food (not WPI or SPPI) [2][3].