Hotels and restaurants are comfortably the fastest-growing segment of the country’s services sector, expanding by more than 35% year-on-year on average in 2025-26 as well as the first month of 2026-27, according to new data released on Tuesday by the Ministry of Statistics and Programme Implementation (MoSPI).
The ‘accommodation and food’ sub-sector is one of 19 – covering approximately 60% of the services sector – which together make up the Index of Services Production (ISP), released for the first time on Tuesday on an experimental basis. Since the data is still at a trial stage, no overall services sector growth number was provided by MoSPI.
However, DK Srivastava, EY India’s Chief Policy Advisor, estimated the overall growth at 20.8% in April.
Of the 19 sub-sectors, all but two grew on a year-on-year basis in April, with 14 posting double-digit growth rates. In 2025-26, all but one sub-sector had grown, with output of 12 rising by 10% or more.
The release of the trial ISP data is the latest addition to India’s official statistics. It is the services counterpart of the Index of Industrial Production (IIP), which measures the change in the output of India’s industrial sectors: manufacturing, mining and quarrying, electricity and gas supply, and ‘water supply, sewerage & waste management’.
The ISP fills a key gap in India’s official statistics; until now, there was no official monthly measure of the services sector’s performance, with private sector firm S&P Global’s services Purchasing Managers’ Index (PMI) being the only one.
Services are the biggest contributor to India’s economy, making up more than half of it for the last decade and a half or so. Industry, meanwhile, makes up less than a third of the Gross Value Added (GVA).
Measuring production of services is notoriously difficult. As Chief Economic Advisor V Anantha Nageswaran said: “A car leaving a factory can be counted, a tonne of cement can be weighed. But a consultation, software release, a train journey, a loan sanction – these are all produced and consumed at the same moment; there is nothing to weigh or put in a warehouse. Therefore, every statistical system in the world, not just in India, was built first for the factory”.
The ISP is not directly compiled as the output of the services produced by various companies; instead, Goods and Services Tax (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.
Speaking at the release of the ISP figures, MoSPI Secretary Saurabh Garg said a key feature of the new data series is that its 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.
He cautioned that since the ISP is not a measure of GVA – released every quarter with GDP data – it may or may not move in the same direction as GVA growth.
Meanwhile, Nageswaran noted that the use of GST as a key source of data for the statistics ministry shows how a tax reform “has quietly become an information system.”
While the ‘accommodation and food’ sub-sector has grown rapidly, railway and air transport struggled. After growing by 2.5% on average last year, railway transportation services shrunk by 0.4% in April. Air transport saw 4.4% average monthly growth in 2025-26 but a 13.9% contraction in April. The fall in the air transport index in April came amid the disruption caused by the West Asia war, which led to airlines raising fares on account of higher fuel costs.
The other sub-sectors of the ISP – which has a base year of 2024-25 – are: wholesale trade, retail trade, repair services, road transport, water transport, warehousing and support activities for transportation, postal and courier, telecommunications, information and broadcasting, banking, insurance, real estate, IT and computer related services, ‘professional, scientific & technical services including R&D’, administrative and support services, and arts, entertainment and recreation.
Health and education are two key segments not covered by the ISP as they are exempt from GST. However, MoSPI officials said the ministry is working on using administrative data to compile the index for health, education, and ownership of dwellings. Once this exercise is concluded, the overall ISP will cover 80% of the services sector.
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. These account for roughly 30% of the services sector.
While the ‘accommodation and food’ sub-sector has grown rapidly, railway and air transport struggled. (Credits: Ministry of Railways) 
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