Government plans monthly indicator for service sector output using GST data

The Ministry of Statistics and Programme Implementation (MoSPI) on Monday outlined its plan to measure the output of the formal services sector every month, with the Goods and Services Tax (GST) data set to be a crucial input in the indicator. Releasing an ‘approach paper’ on the same, the statistics ministry on Monday invited comments by May 5 on its plan to compile an Index of Service Production (ISP) for the economy’s formal sector with 2024-25 as the base year.

The paper comes ahead of the revision of the Index of Industrial Production (IIP) next month as part of MoSPI’s overhaul of official statistics. Currently, there is no services counterpart to the IIP, which is one of the two monthly, or high-frequency data, published by the government, with the other being the Consumer Price Index (CPI), on whose basis the headline retail inflation number of the country is calculated. Both the IIP and CPI numbers are keenly eyed by policymakers to understand the trajectory of the economy and the underlying developments. To understand how India’s services sector is performing, policymakers and economists currently refer to the S&P Global’s HSBC Purchasing Managers’ Index. However, the PMI is a survey-based sentiment index and does not measure actual output.

“The services sector is the most dynamic and rapidly expanding segment of the economy. In terms of economic significance, the services sector contributes more than half of India’s GDP, generates millions of jobs and has been a major catalyst for the country’s economic transformation in the last few decades,” MoSPI said on Monday.

The index will cover sub-sectors such as wholesale and retail trade, transportation and storage, accommodation and food services, publishing, telecom, consultancy, computing infrastructure, finance and insurance, real estate, and arts, sports and recreation, among others.