India’s new service price gauge shows mixed Q1 trends; Air (Passenger) Service Price Index up 32%

Air passenger service prices jumped nearly 32% year-on-year in the first quarter of FY27, while prices across other services showed a mixed trend, according to India’s latest Service Producer Price Index (Service PPI) released Monday.

The data, which is released quarterly, shows an early view of price movements on the producer side of the services economy, although the index currently covers only seven services and does not represent the entire sector.

The Air (Passenger) Service Price Index rose to 126.4 in Q1 FY27 from 106.9 in Q4 FY26, translating into a 31.94% year-on-year increase. It was the sharpest annual increase among the seven services covered in the latest release.


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The data released by the Office of Economic Adviser, Department for Promotion of Industry and Internal Trade (DPIIT), also showed that management of pension funds recorded 5.2% inflation, while railway services rose 1.27%, insurance 0.98% and telecom 0.72%.

At the other end, the Banking Service Price Index fell 3.35% year-on-year, while the Securities Transaction Service Price Index declined 1.32%.

What the new service price index measures

The Service PPI is designed to track changes in prices for selected services at the producer level. Unlike a consumer price measure like the retail inflation, which looks at prices paid by households, a producer price index captures price movements associated with services provided by various businesses.

The government is currently compiling the index for seven services: banking, securities transactions, insurance, management of pension funds, railways, air passenger services and telecom.

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The index uses 2022-23 as its base year and is released quarterly. The latest release provides provisional estimates for Q1 FY27 and final estimates for Q4 FY26.

The government has not assigned an overall weight to the seven services because they do not cover the entire services sector. However, weights have been assigned at the sub-service level within each category to calculate the respective Service PPI.

Banking prices fall, contribution index rises

The banking data shows why the individual indices need to be read separately.

The Banking Service Price Index stood at 100.9 in Q1 FY27, compared with 100.5 in Q4 FY26. Despite the sequential increase, it was down 3.35% from a year earlier.

The separate Banking Service Contribution Index, however, rose 6.9% year-on-year to 134.8 in Q1 FY27 from 131.5 in the previous quarter.

The two measures capture different aspects of banking services and therefore should not be treated as a single measure of banking price inflation.

Air passenger services emerge as the outlier

Air passenger services showed the biggest movement in the latest data.

The index climbed from 94.3 in Q2 FY26 to 107.3 in Q3, 106.9 in Q4 and 126.4 in Q1 FY27. On a year-on-year basis, the index was up 31.94% in Q1.

The other service categories were considerably more stable.

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The Securities Transaction Service Price Index was at 89.9 in Q1, compared with 91.7 in Q4, while the telecom index remained unchanged at 112.2.

The railway service index edged up to 103.4 from 103.3. Within railways, the freight index increased to 103.3 from 103.2, while the passenger index remained unchanged at 103.5.

The insurance index also stayed at 102.9 in both Q4 and Q1.

Why the latest data set matters

India has traditionally relied heavily on the Wholesale Price Index to track price movements, but WPI primarily covers goods. The government’s new producer-price framework is intended to provide a broader picture of price changes at the production stage, including services.

The government introduced the new WPI series with 2022-23 as the base year, replacing the earlier 2011-12 series. Alongside the revised WPI, DPIIT introduced an Output Producer Price Index, a trial Input Producer Price Index and the Service PPI.

The Centre has said the move towards producer-price indices is aligned with international practices and recommendations of the International Monetary Fund. The WPI will continue to be released for five years from the launch of the new series to give users time to transition to the producer-price framework.

The Service PPI is still at an early stage. The government is releasing data for only seven services, therefore the figures cannot be read as an economy-wide measure of services inflation.