UPI, Government Salaries May Help Measure Growth in Health and Education Services

The Statistics Ministry is considering expanding the range of data used to measure growth in India’s services sector. Among the proposed indicators are UPI payment transactions and salaries paid by the government, which could be used to assess the performance of services such as education, health, public administration and defence.

The proposal is linked to the new Index of Services Production (ISP), which is currently being released by the Statistics Ministry on a trial basis. The index is intended to serve as a services-sector counterpart to the Index of Industrial Production (IIP), a key indicator used to track industrial activity in the country.

According to the ministry, incorporating additional indicators such as UPI transactions and government salary payments could increase the number of services covered by the ISP. This would potentially provide a broader picture of activity across important public-service sectors.

UPI Data Under Consideration

The proposed use of UPI data for the ISP comes even though a sub-committee of the ministry’s Advisory Committee on National Accounts Statistics had earlier decided against using UPI payments as an input for calculating India’s GDP.

The sub-committee had raised concerns about the stability of payments transaction data. A significant number of people are still using cash for transactions, meaning that UPI data may not yet provide a sufficiently stable indicator for some forms of economic measurement.

In its report released in February, the sub-committee said that once UPI transaction data stabilises, its possible use as an indicator for estimating Private Final Consumption Expenditure (PFCE) could be explored.

Government Salaries as a Services Indicator

The Statistics Ministry is also considering government salary payments as a potential indicator for measuring activity in public administration and defence services. Such data could help broaden the coverage of the services-production index beyond the sectors currently represented.

Education and healthcare are among the other areas the ministry is looking at as it works to improve the measurement of services-sector activity.

ISP as a Services-Sector Counterpart

The Index of Services Production is currently being released on a trial basis. Its broader objective is to provide a regular measure of production and activity in the services sector, similar to the role played by the Index of Industrial Production for industry.

Services form a major part of economic activity, making better measurement important for understanding changes in the economy. Expanding the ISP to cover additional areas could therefore provide more information about how different parts of the services sector are performing.

However, the ministry’s consideration of UPI data also highlights the challenges involved in selecting reliable indicators. While digital payments have expanded significantly, the Statistics Ministry’s earlier advisory review noted that payment transaction data needs to become more stable before it can be considered suitable for certain national accounting calculations.

The ministry’s latest proposal indicates that UPI data could nevertheless be explored for the Index of Services Production, even as questions remain about its suitability for GDP estimation. The final composition and use of these indicators will depend on the ministry’s ongoing work on developing the new services-sector index.