In April, India's formal services sector demonstrated robust growth, with 14 out of 19 sectors tracked by the new Index of Service Production showing double-digit increases, led by accommodation and food services.
New Delhi, India Jul 15, 2026 ALN: New Delhi: India's formal services sector began the new fiscal year on a strong note, with 14 of the 19 sectors covered under the newly launched Index of Service Production (ISP) posting double-digit growth in April. This robust performance is indicative of a broader recovery and a resurgence in domestic demand following the challenges posed by the COVID-19 pandemic. The pandemic had a profound impact on various sectors of the , leading to significant contractions in output and employment, particularly in service-oriented industries. As the country emerges from these challenges, the latest data suggests a revitalization of consumer confidence and spending.
Accommodation and food services led the expansion, growing 37.2% year-on-year in April, followed by retail trade (30.8%), administrative and support services (28.7%), and real estate (27.7%). These figures suggest that consumer confidence is on the rise, with individuals increasingly willing to spend on services that were previously curtailed due to health concerns and lockdown measures. The Ministry of Statistics and Programme Implementation (MoSPI) launched the ISP on Tuesday, with a base year of 2024-25. The monthly index tracks output across 19 services sectors that together account for more than half of India's output, reflecting the significant role the services sector plays in the nation's .
The trial index covers about 60% of the services sector, providing a crucial tool for policymakers and economists to gauge activity in this vital area. Chief adviser V. Anantha Nageswaran described the introduction of a monthly services output indicator as "a real achievement". This new index is expected to enhance the understanding of service sector dynamics, which have often been less transparent than those of the goods sector. Among other sectors, telecommunications grew 22.8% in April, repair services grew 19.2%, road transport grew 18.5%, and warehousing and transport support services grew 18.2%. These growth rates reflect the increasing reliance on digital communication and logistics solutions, particularly as businesses adapt to a post-pandemic landscape.
In contrast, railway transport contracted 0.4%, while air transport declined 13.9%. These declines could be attributed to ongoing challenges in the aviation sector, which continues to grapple with fluctuating passenger numbers and operational disruptions. The pandemic has had a lasting impact on air travel, with many consumers still hesitant to fly due to health concerns, and airlines working to recover from significant losses incurred during travel restrictions. This situation highlights the uneven recovery across different service sectors, where some areas rebound strongly while others continue to struggle.
“Building price indices for services is, of course, not an easy task, as it is the case for goods in general, and that is the most valuable investment we can make, and we will continue to make in producing this index of services production,” said the Chief Adviser (CEA). This statement underscores the complexities involved in measuring service sector output, which often lacks the tangible metrics available in the goods sector. Accurate data collection and analysis are crucial for formulating effective policies and understanding market trends. The service sector's intangible nature makes it challenging to assess performance, necessitating innovative approaches to data collection.
The CEA added that the ISP's coverage will eventually expand to include health, education, and ownership of dwellings, raising its coverage of the formal services sector to about 85-90%. This expansion is significant as it will provide a more comprehensive view of the services landscape, which is essential for addressing the needs of a growing and diverse population. The inclusion of health and education is particularly noteworthy, as these sectors have been at the forefront of public discourse during the pandemic, highlighting the importance of robust data in shaping policy responses.
MoSPI Secretary Saurabh Garg highlighted that India has joined the group of few countries (the United Kingdom, European Union, and South Korea) which have this index. The inclusion of India in this exclusive group signifies a step forward in the country's analytics capabilities and aligns it with global best practices in measurement. He noted that the ISP is an output indicator and not a value-added indicator, emphasizing the importance of distinguishing between different types of metrics when analyzing sector performance. This distinction is crucial for policymakers, as it affects how they interpret data and make decisions that impact growth.
The CEA cautioned against reading a single month's data, stressing that the series should be read over time. This perspective is critical for understanding trends and avoiding overreactions to short-term fluctuations. The reading suggests that India's formal services sector entered FY26 on a strong footing, which could bode well for overall growth in the coming months. By maintaining a long-term perspective, stakeholders can better assess the sustainability of the recovery and identify potential areas for intervention.
On average, accommodation and food services led the growth with 35.6% in FY26. Next was retail trade at 30.5%, followed by repair services (25.1%), wholesale trade (23.6%), and road transport (22.6%). These figures indicate a broad-based recovery across multiple sectors, suggesting that consumer spending is not only returning but also growing at a robust pace. The resurgence in accommodation and food services can be attributed to the lifting of restrictions and a return to social activities, which have encouraged consumers to dine out and travel.
Administrative/secondary data, GST data, and Annual Survey of Incorporated Services Sector Enterprises (ASISSE) data are the three principal data sources used in the ISP. The ministry uses administrative data for sectors such as railways, air and water (freight) transport, banking, and insurance, while GST data is used to compile indices for trade, telecommunications, water transport (passenger), real estate, information technology, and others. This multi-faceted approach to data collection ensures a more accurate representation of the services sector's performance, allowing for better-informed policy decisions. The integration of various data sources also enhances the reliability of the index, making it a valuable tool for analysis.
In conclusion, the strong performance of India's services sector in April reflects a significant rebound from the disruptions caused by the pandemic, with various sectors showing remarkable growth. The introduction of the ISP marks a pivotal moment in the country's monitoring capabilities, providing a clearer picture of the services landscape. As the index expands to cover more areas and as data collection methods improve, stakeholders will be better equipped to navigate the complexities of the services sector, ultimately contributing to more effective policies and sustained growth. The implications of this growth extend beyond immediate recovery; they also suggest a shift in consumer behavior and preferences that may shape the future landscape of India's .
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