India to widen services production index to include education, health and defence

New Delhi: The statistics and programme implementation ministry aims to widen the scope of the monthly Index of Services Production (ISP), bringing education, healthcare, and public administration and defence into the framework and increasing its coverage to 78.4% of service sector gross value added (GVA) from about 60% currently.

The move is aimed at creating a broader high-frequency gauge of services activity, which accounts for more than half of India's GVA. The ministry began compiling the ISP on a trial basis in July, setting 2024-25 as the base year. Its initial framework covers 19 service sub-sectors.

"This expanded framework will enable aggregation of the sub-sectoral indices into a unified, all-encompassing Index of Services Production that provides a representative reflection of short-term movements of India's services sector," the ministry said in a statement.


The ministry has invited stakeholder comments on its approach paper released on Tuesday for expanding the index. The deadline for submissions is October 16.

The ministry has proposed using Unified Payments Interface (UPI) transaction data as a high-frequency proxy for private education and healthcare activity. Since goods and services tax (GST) collections are unreliable due to many services being GST-exempt, this approach would utilise UPI transactions classified by merchant category codes, combined with relevant price indices.

For public education and health services, the ministry proposes using Public Financial Management System (PFMS) expenditure data as an output proxy.

Public administration and defence, which account for 10.68% of services GVA, pose a different measurement challenge as these are largely non-market services. To address this, the ministry proposes a sum-of-costs approach, using employee compensation and operational expenditure to estimate output. Central government data would be sourced from PFMS, while state-level data would draw on monthly accounts available through the Comptroller and Auditor General of India.

The ministry has, however, also flagged certain limitations. UPI measures monetary transactions rather than physical output and can be influenced by changes in payment behaviour. Additionally, government expenditure can show sharp monthly fluctuations because of accounting and payment cycles.