MoSPI is launching India’s first monthly Index of Services Production (ISP) with a 2024-25 base year to track formal services output. Using GST data and administrative records, the ISP complements the IIP to strengthen real-time economic monitoring and policymaking.
Why In News?
The Government of India launched the Index of Services Production (ISP) to establish a high-frequency macroeconomic indicator for the services sector.
What is the Index of Services Production (ISP)?
The ISP functions as a short-term, high-frequency indicator that measures monthly changes in the real volume of output produced by the formal services sector relative to a 2024-25 base year.
Objectives: The index complements the Index of Industrial Production (IIP), provides timely performance data, strengthens evidence-based policy formulation, and enables robust business cycle analysis.
Nodal Agency: The National Statistical Office (NSO) compiles the index, aligning it with the new Consumer Price Index (CPI) series.
Release Frequency: The government releases the ISP monthly with a 60-day time lag on the 29th of each month, utilizing a fixed-weight Laspeyres volume index formula.
Sectoral Coverage
Trade: Captures wholesale and retail trade, deflating nominal turnover using the Wholesale Price Index (WPI).
Transport: Covers air, rail, road, and water transport, with air and rail utilizing quantity-based indicators like passenger-kilometers.
Financial Services: Tracks banking and insurance via administrative records, using the General CPI as a deflator.
Information Technology: Measures telecommunications and IT services using GST outward supplies data.
Hospitality: Monitors hotels and restaurants through GST network filings.
Healthcare: Currently excluded due to GST exemptions, but slated for future integration via the Annual Survey of Incorporated Services Sector Enterprises (ASISSE).
Significance
Performance Measurement: It replaces fragmented proxies like the Purchasing Managers' Index (PMI) with hard statistical data to provide an exact snapshot of real-time service turnover.
Policy Formulation: High-frequency trends allow the government to identify sector-specific distress and deploy targeted fiscal or monetary interventions.
Economic Forecasting: The ISP equips the Reserve Bank of India (RBI) with reliable time-series data for precise "nowcasting" of GDP growth.
GDP Accuracy: It augments National Accounts Statistics (NAS), reducing data revisions.
Real-Time Monitoring: Provides a monthly diagnostic pulse of the economy.
Investment Decisions: Empowers investors to track service-sector momentum for efficient capital allocation.
Global Standards: Aligns India’s statistical framework with OECD and Eurostat benchmarks.
Source: PIB
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PRACTICE QUESTION Q. Consider the following statements regarding the newly proposed Index of Services Production (ISP): 1. It is compiled and published by the Reserve Bank of India (RBI) with a base year of 2011-12. 2. It tracks the output of both the formal and informal services sectors in India. 3. It utilizes Goods and Services Tax (GST) outward supplies data for measuring value-based indicators in various service sub-sectors. Which of the statements given above is/are correct? (a) 1 and 2 only (b) 3 only (c) 2 and 3 only (d) 1, 2, and 3 Answer: (b) Explanation: Statement 1 is incorrect: The ISP is compiled and published by the Ministry of Statistics and Programme Implementation (MoSPI), not the Reserve Bank of India (RBI). Furthermore, the proposed base year for the ISP is 2024-25, not 2011-12. Statement 2 is incorrect: The ISP is specifically designed to track and measure the output of the formal services sector. It deliberately excludes core informal and unorganized service categories. Statement 3 is correct: The index heavily relies on GST outward supplies (GSTR-1) data to measure value-based indicators for various market service sub-sectors. |
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