Strong growth witnessed in services sector in August; 17 out of 19 sub-sectors grew

Widespread growth was witnessed in India's services sector during the month of August. According to the report on the fifth Trial Index of Services Production (ISP) released by the Central Government on Thursday, growth was recorded in 17 out of 19 sub-sectors, and double-digit growth was observed in 13 sub-sectors. These figures suggest that despite mixed signals from manufacturing and external trade, continuous momentum is being maintained in formal sector services.

This 19-sector index covers approximately 60 per cent of the services sector. Since the services sector represents more than half of India's economy, this index provides a new monthly benchmark for the activity of this sector. Regarding this, the Ministry of Statistics and Programme Implementation stated in a release that after studying the stability and resilience of the sub-sectoral ISP and improving the broad coverage of services, a full ISP will be released.

According to the report, retail trade recorded the fastest growth of 19.9 per cent in August. Other strong growth sub-sectors include repair services at 17.6 per cent, real estate at 17.6 per cent, administrative and support services at 13.1 per cent, banking at 14.9 per cent, professional, scientific and technical services (including research and development) at 14.2 per cent, IT and computer-related services at 13.8 per cent, and accommodation and food at 11.9 per cent growth. Repair services, which saw a decline in July, made a smart recovery with double-digit growth in August.

While retail trade saw high growth, growth in wholesale trade remained relatively low at 102 per cent. The telecommunications sector expanded by 11.8 per cent and warehousing and support activities for transport by 11.2 per cent. Postal and courier services as well as information and transmission services, which were in the negative zone in previous months, saw continuous growth of 13.2 per cent and 7.2 per cent respectively.

Mixed results were seen in the transport sector. Rising energy prices due to the war in West Asia have continued to keep the growth of air transport services in the negative zone at -9.6 per cent, showing a decline for the fifth consecutive month. Growth in arts, entertainment and recreation services also saw a decline of -4.7 per cent. Other transport services were recorded with single-digit growth, with railways at 3.7 per cent, roadways at 9.4 per cent, and waterways at 9.5 per cent.

D.K. Srivastava, Chief Policy Advisor at EY India, stated, "The ISP shows a year-on-year growth rate of 14.0 per cent, confirming strong growth momentum. Since June 2026, the ISP has shown double-digit growth, with an average growth of 13.6 per cent observed during the three months up to August. Considering the weight of the services sector in overall GDP, these trends indicate the possibility of healthy GDP growth for the second quarter of 2026-27. This is also confirmed by the IIP growth of the second quarter, which was on average 7.3 per cent."

This ISP has been designed as a services-sector equivalent to the Index of Industrial Production (IIP). It provides a high-frequency indicator to the Government, Reserve Bank of India (RBI), and financial markets to assess economic activity, so they can obtain accurate data instead of relying on indirect benchmarks such as quarterly GDP estimates and GST collections, Purchasing Managers' Indices (PMIs), and bank credit.

This trial series has been released initially to validate the methodology and obtain stakeholder feedback, after which this index will become part of India's regular statistical releases. The services sector has emerged as the main driver of the country's growth, accounting for more than 53 per cent share of Gross Value Added (GVA) and contributing significantly to employment, exports, and investment.

Unlike the IIP, which measures physical production in manufacturing, mining, and electricity, the ISP captures changes in the real output of services. Services are generally produced and consumed simultaneously and do not accumulate in inventory, so this index primarily uses inflation-adjusted turnover as a proxy for production. Pranjal Ghate, economist at Brickwork Ratings, stated, "The August ISP figures point towards resilient local demand supporting service activity, and as a new experimental series, the ISP is a welcome addition to India's statistical infrastructure."