Services sector growth may have fallen sharply in May, suggests MoSPI’s experimental data

Released for the first time earlier this month, the ISP is the services counterpart to the IIP, which measures the industry’s performance in output terms.

“There are clear indications of a robust growth momentum for the 1Q 2026-27 with IIP growth in this quarter showing an average growth of 5.7% and services (ISP) sector for the first two months of this quarter showing an average growth of 15.3%,” said DK Srivastava, EY India’s Chief Policy Advisor.

Leading the charge for the services sector in May was the ‘accommodation and food’ category, which grew by 27.4% after posting a growth of 37.2% in April. However, this was one of the 17 sub-sectors out of the total of 19 that recorded weaker year-on-year growth in May than in April.

The only two sub-sectors that performed better in May were railway transport (3.4% versus -0.4%) and air transport. While air transport shrank by 2.8% in May, it was still better than a 13.9% contraction in April.

Air transport activity has been adversely impacted following the onset of the war in West Asia, which led to airlines raising fares on account of higher fuel costs.

IT and computer related services, which has the highest weight in the ISP at 22.47%, saw its growth decline to 10.3% in May from 15.2% in April.

To be sure, 16 of the 19 sub-sectors grew in May, with eight of them recording double-digit growth. In April, 17 sub-sectors had grown on a year-on-year basis, with 14 posting double-digit growth rates.

The ISP fills a key gap in India’s official statistics. Until now, there was no official monthly measure of the performance of the services sector, which dominates the Indian economy and makes up more than half the GDP. Private firm S&P Global’s services Purchasing Managers’ Index (PMI) has been the only measure of the country’s services sector.

India’s services PMI in May had risen to 59.8 in May from 58.8 in April. However, the PMI is a sentiment index and does not measure year-on-year change in production; instead, it looks at momentum in activity from one month to another, with a reading of more than 50 indicative of growth.

The trial ISP covers about 60% of the services sector and does not include two key segments – health and education – as they are exempt from Goods and Services Tax (GST). The ISP is calculated on the basis of GST data. As such, the ISP’s compilation does not place additional compliance burden on companies to respond to a MoSPI questionnaire or survey as it is calculated entirely through data that is already available.

Core government activity – such as public administration, defence, the Reserve Bank of India – non-market activities, and the informal sector are also excluded from the ISP.

The ISP is not directly compiled as the output of the services produced by various companies; instead, GST and administrative data for sub-sectors like air and railway transport and banking are used. Sub-sectors for which data is available in value terms are ‘deflated’ by the appropriate measure, be it Wholesale Price Index or Consumer Price Index, to arrive at the output.