May services growth halved to under 10%, data suggests

Why in the News

India’s services sector growth appears to have more than halved in May 2026, falling to about 9.5% from around 20.5% in April, according to the Ministry of Statistics and Programme Implementation’s (MoSPI) new experimental Index of Services Production (ISP). This is the first official monthly measure of services output, exposing a slowdown that no single earlier indicator could confirm.

What is the Index of Services Production (ISP)?

1. Purpose: The ISP is MoSPI’s new experimental monthly measure of output across 19 services sub-sectors, released for the first time this month.
2. Base year: The index uses 2024-25 as its base year and remains at a trial stage.
3. Gap it fills: Until the ISP, India had no official monthly measure of the services sector, which makes up more than half of GDP; only the private S&P Global services Purchasing Managers’ Index (PMI) existed.
4. Counterpart index: The ISP is the services-sector counterpart to the long-existing Index of Industrial Production (IIP), which measures manufacturing and mining output.

Highlights

1. Headline decline: Calculations by The Indian Express show services growth fell from around 20.5% in April to approximately 9.5% in May.
2. Comparison with industry: Even at 9.5%, May services growth remained almost double the 5% expansion recorded by industry under the IIP.
3. Sub-sector spread: 16 of 19 sub-sectors grew in May, with eight recording double-digit growth, down from 17 growing sub-sectors and 14 in double digits in April.
4. Leading sub-sector: Accommodation and food led services growth in May at 27.4%, though this was down from 37.2% in April.
5. IT services slowdown: IT and computer-related services, the highest-weighted sub-sector at 22.47%, saw growth decline to 10.3% in May from 15.2% in April.
6. Exceptions: Railway transport and air transport were the only sub-sectors that performed better in May than April, though air transport still contracted by 2.8%.

Why did air transport underperform even as it improved?

1. War-linked cost pressure: Air transport activity has been hurt by the war in West Asia, which raised fuel costs and pushed airlines to increase fares.
2. Sequential improvement: Air transport’s May contraction of 2.8% was still an improvement over a 13.9% contraction in April.

Back2Basics:

Index of Services Production (ISP)

• Released by: Ministry of Statistics and Programme Implementation (MoSPI)
• Nature: Experimental monthly index
• Base Year: 2024-25
• Coverage: 19 services sub-sectors
• Measures: Monthly output of the services sector
• Purpose: Official high-frequency indicator of services sector performance
• Counterpart: Index of Industrial Production (IIP)

Key Facts

• India’s first official monthly index for measuring services sector output.
• Covers the largest contributor to India’s economy, accounting for over 55% of GDP.
• IT & Computer Services has the highest weight (22.47%) in the index.
• Compiled using actual production/output data, unlike survey-based indicators.

ISP vs Services PMI

• ISP
  • Official index compiled by MoSPI.
  • Measures actual services output.
  • Based on administrative and statistical data.
• Services PMI
  • Published by S&P Global.
  • Measures business activity and sentiment through surveys.
  • Indicates expansion or contraction, not actual output.

[2012] In India the overall Index of Industrial Production, the Indices of Eighth Core Industries have combined weight of 37.90%. Which of the following are among those Eight Core Industries?
1. Cement
2. Fertilizers
3. Natural Gas
4. Refinery products
5. Textiles
Select the correct answer using the codes given below:

[A] 1 and 5 only

[B] 2, 3 and 4 only

[C] 1, 2, 3 and 4 only

[D] 1, 2, 3, 4 and 5