Despite the fact that services share a huge fraction of India's GDP, there is no index of service production similar to Index of Industrial Production so far. While explaining how measuring production of services is different than measuring production of goods; suggest the key heads which should be placed in the Index of Services Production (ISP) for India.

Over the years, services have become the most dynamic sector of the economy. They contributed nearly 60% of the country’s gross domestic product (GDP). Yet the services sector in India does not have a separate index to measure services production. An index for services is expected to help policymakers and analysts get a better understanding of the economy. Presently, the government is working on creating such an index.
Measuring services production is different from goods production for several reasons.

  • First, unlike good, services are intangible and ownership rights cannot be established over services.
  • Second, services are produced at the demand of the consumers and cannot be traded separately from their production.
  • It is the most dynamic sector, composition of units in the Service sector undergoes changes at a rapid pace because newer service areas come into existence and others disappear with rapid frequency.
  • Another problem is availability of data. Unlike the index of industrial production that is available on a monthly basis, the services production data will be available at different intervals. Data on some sectors will be released on a monthly basis, while some released on Quarterly or half yearly basis

The index of services sector should be able to measure changes over time in the volume of output of the Services sector. The index should be the weighted average of the real output of the industries of the service sector. The products included should be those that contribute to the gross output of the services industries. These products may be goods or services. It may also take into account those products that are not primary to the industries.
It would be recommended that the index for services comprise of two sub-indexes, one for Market Services Production and the other for Non-market Services Production.

Question for UPSC Mains:
Despite the fact that services share a huge fraction of India's GDP, there is no index of service production similar to Index of Industrial Production so far.  While explaining how measuring production of services is different than measuring production of goods; suggest the key heads which should be placed in the Index of Services Production (ISP) for India.

Published: September 26, 2017 | Modified:June 27, 2019

Comments