A Services Index Built on GST Data: What India's New ISP Sees and Who It Cannot See

THE INDEX THAT SEES THE INVOICE, NOT THE STREET

Services make up more than half of India's economy, yet until this week India had no monthly measure of how they were doing. Policymakers tracked factories every month through the Index of Industrial Production and waited for quarterly GDP to learn about everything else. The new Index of Services Production fixes that gap. How it fixes it matters more than July's growth numbers.

The mechanism:

tax data becomes economic data The ISP does not send surveyors to businesses. It reads GST returns. Every registered business reports its outward supplies, the value of what it sells, when it files GST. MoSPI groups these returns into 19 service sub-sectors and turns them into an index with 2024-25 as the base year. This has two big advantages:

• Speed and coverage. Data that businesses already file each month becomes a monthly indicator, with no new reporting burden on them.
• Detail. Sub-sector figures show where growth is happening. In July, administrative and support services grew 20.9%, while air transport fell 8.4%. A single quarterly GDP number would hide that split.

Who sits outside the average Now zoom to the ground.

GST registration is compulsory only above a turnover threshold, which for most service providers is ₹20 lakh a year. Below it, businesses are not in the data at all. That leaves out a large share of India's service workers:

1. The neighbourhood tailor, barber and cycle-repair shop.
2. Street food vendors and most small eateries.
3. Domestic workers, private tutors and many individual transport operators. These are the people most exposed to a slowdown and the ISP cannot see them. So "10 of 19 sub-sectors in double digits" really means formal, GST-registered services grew fast. Informal services may have grown more slowly or not at all and the index would not show it. There is a subtler risk too. When business moves from informal to formal firms, as when a local repairman loses customers to a registered service chain, the ISP records growth. In reality, some of that is activity shifting into the GST net, not new activity.

Why "trial basis" is not a footnote Three cautions apply:

• Value versus volume. GST returns record sales in rupees. Turning them into real output means removing price effects and the choice of deflator can change the reading.
• Revisions. Late and quarterly filers can change the numbers after first release, so early monthly figures may shift.
• A short track record. With a new base year and only a few months of data, patterns are hard to tell apart from noise.