MoSPI expands Index of Services Production to better capture India's services sector growth

Livemint - Economy · 7 Oct 2026 · 2 min read
Prelims · Economy Mains · GS3 Economy High relevance

The Ministry of Statistics and Programme Implementation (MoSPI) plans to broaden the Index of Services Production (ISP) to include education, healthcare, and public administration, increasing coverage from 60% to 80% of services GVA, addressing critical measurement gaps in India's services-dominated economy.

Key points

Index of Services Production (ISP): MoSPI's monthly index tracks formal sector services output, currently covering 19 sub-sectors representing 60% of services GVA, using 2024-25 as base year and high-frequency data like GST, banking, and transport metrics.

Proposed expansion: Will add education (7.15% GVA), healthcare (2.96% GVA), and public administration/defense (10.68% GVA) through hybrid methodologies combining market and non-market indicators, raising coverage to 78.4% of services GVA.

Measurement challenges: Services are intangible and heterogeneous, requiring non-traditional metrics like UPI transactions for private education/healthcare and PFMS expenditure data for public services, as turnover alone cannot capture real output changes.

Public administration tracking: Will use 'sum-of-costs' methodology with PFMS data for Centre and CAG State Accounts for states, covering salaries and operational expenditure, deflated using CPI-IW and general CPI respectively.

Data limitations: MoSPI acknowledges gaps in state-level education/health expenditure data and volatility in UPI metrics due to payment behavior changes, requiring cautious interpretation of monthly trends.

[GS3-Economy] This expansion aligns with India's structural economic shift toward services (54% of GVA), enabling better macroeconomic policymaking by capturing previously unmeasured productivity in critical social sectors.

Governance significance: Improved services measurement supports evidence-based policy for India's National Education Policy 2020 and Ayushman Bharat, while enhancing fiscal transparency in public administration spending.

International context: Follows global best practices like EU's KLEMS database in measuring non-market services, crucial for cross-country GDP comparisons and trade negotiations involving services.

Way Forward: MoSPI should institutionalize state-level PFMS adoption for granular data, develop sector-specific deflators beyond CPI, and establish an expert committee to periodically review ISP methodology as digital payment ecosystems evolve.

Key terms

Gross Value Added (GVA)

A macroeconomic measure of economic output that calculates the value of goods and services produced minus intermediate inputs. For UPSC, it's crucial as India's services sector contributes 54% to GVA, making accurate measurement vital for GDP computation and sectoral policy formulation under the National Statistical Office.

Public Financial Management System (PFMS)

A web-based platform for tracking fund flows and expenditures across government schemes. UPSC relevance lies in its role in fiscal transparency, Direct Benefit Transfer implementation, and now as a data source for measuring non-market services output in national accounts.

Consumer Price Index (CPI)

A measure tracking price changes in a basket of consumer goods/services. For UPSC, CPI's sub-indices (like CPI-IW used here) are critical for inflation targeting by RBI under Monetary Policy Framework Agreement 2016 and for deflating nominal values in national accounts.

Comptroller and Auditor General (CAG)

Constitutional authority under Article 148 auditing government accounts. Its State Accounts reports will now feed into services measurement, highlighting institutional interdependence between fiscal accountability and economic statistics - a recurring theme in GS2 Polity and Governance questions.