Index of Services Production (ISP): 5 Critical UPSC Facts
Why in News?
The Ministry of Statistics and Programme Implementation (MoSPI) released trial data for the Index of Services Production (ISP), India’s first high-frequency macroeconomic indicator to measure the performance of the formal services sector. The trial ISP covers 19 sub-sectors, together accounting for nearly 60% of India’s total services output.
Key Facts for Prelims: Index of Services Production (ISP)
- Released by: National Statistical Office (NSO), under MoSPI
- Nature: Monthly, high-frequency macroeconomic indicator
- Base Year: 2024-25
- Coverage: 19 sub-sectors of the formal services sector, accounting for ~60% of total services output
- Compilation Formula: Fixed-weight Laspeyres volume index
- Weights: Based on sectoral contribution to Gross Value Added (GVA)
- Highest-weight sub-sector: IT services (22.47%), followed by retail trade (16.4%)
- Data Sources: Administrative data (air transport, railways, banking, insurance); GST outward-supply data (bulk of market services); ASISSE survey (health and education, to be added later)
- Release Lag: ~60 days, on the 29th of every month
- TAC-ISP Chair: Ms. Debjani Ghosh, Distinguished Fellow, NITI Aayog
Static Exam Link: ISP vs Index of Industrial Production (IIP)
The Index of Industrial Production (IIP) measures short-term output only of the industrial sector (mining, manufacturing, electricity) and has no counterpart for services. Since the services sector contributes over 50% of India’s Gross Value Added (about 52.9% in 2024-25) and nearly 30% of employment, the absence of a similar short-term services indicator was a long-standing statistical gap. The ISP fills this gap and complements the IIP for full-economy monitoring.
- ISP excludes: Public administration and defence, non-market financial services, personal services, government-run health/education, and gambling activities
- ISP is formal-sector only: It draws on GST outward-supply data, so informal/unregistered services are not captured
- Deflators used: WPI for wholesale trade; sector-specific CPI where available; general CPI for banking, insurance and other services
- Quantity-based sub-sectors: Only Air Transport and Railways (measured in physical units, e.g., passenger-km); all others are value-based
Quick Revision Table: Index of Services Production
| Parameter | Detail |
|---|---|
| Released By | NSO, MoSPI |
| Base Year | 2024-25 |
| Sub-sectors Covered | 19 (nearly 60% of services output) |
| Compilation Method | Fixed-weight Laspeyres volume index |
| Counterpart Index | IIP (Index of Industrial Production) |
| Highest Weight Sub-sector | IT services (22.47%) |
| TAC-ISP Chairperson | Debjani Ghosh, NITI Aayog |
| Data Sources | Administrative data, GST, ASISSE |
Trap / Confusing Points
| Confusion | Correct Fact |
|---|---|
| ISP covers the entire services sector | ISP covers only 19 sub-sectors (~60%) of the formal services sector; informal and several non-market activities are excluded |
| ISP and IIP are compiled the same way | IIP uses physical production quantities; ISP is mostly value-based (GST/turnover), deflated to real output, except Air Transport and Railways which are quantity-based |
| Health and education are covered in ISP now | These two sub-sectors will be added later, based on ASISSE survey results, not GST data |
| Retail trade has the highest weight in ISP | IT services (22.47%) has the highest weight, ahead of retail trade (16.4%) |
Practice MCQs
1. The Index of Services Production (ISP) has been launched by which organisation?
a. RBI
b. NITI Aayog
c. National Statistical Office (NSO), MoSPI
d. Department of Economic Affairs
Ans: C
The ISP is compiled and released by the National Statistical Office under the Ministry of Statistics and Programme Implementation.
2. What is the base year of the Index of Services Production?
a. 2011-12
b. 2022-23
c. 2023-24
d. 2024-25
Ans: D
The ISP uses 2024-25 as its base year, aligned with the base year of the revised CPI series.
3. The Index of Services Production is best described as a short-term counterpart of which index?
a. Consumer Price Index (CPI)
b. Index of Industrial Production (IIP)
c. Wholesale Price Index (WPI)
d. Human Development Index (HDI)
Ans: B
ISP complements the IIP, which measures only industrial output, by tracking short-term services sector performance.
4. Which sub-sector carries the highest weight in the trial Index of Services Production?
a. Retail trade
b. Accommodation and food services
c. IT services
d. Real estate
Ans: C
IT services has the highest weight at 22.47%, ahead of retail trade at 16.4%.
5. Which formula is used to compile the Index of Services Production?
a. Paasche price index
b. Fisher’s ideal index
c. Fixed-weight Laspeyres volume index
d. Chain-weighted index
Ans: C
ISP is compiled as a fixed-weight Laspeyres volume index, with weights based on sectoral GVA contribution.
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