India’s services sector output growth slowed sharply in May from a month ago, according to the trial Index of Services Production (ISP) released on Wednesday by the Ministry of Statistics and Programme Implementation (MoSPI).
All but two of the 19 sectors tracked under ISP saw slower growth in May compared to April. While the ministry did not publish overall growth rate for the ISP, economists estimated that output across the 19-services sectors grew 9.8% in May, much slower than 20.8% in April.
“The moderation in growth was due to lower growth in retail trade, road transport, IT, and admin & support services. However, double-digit growth in 8 of 19 sectors such as accommodation & food, real estate and banking supported overall services growth,” said Rajani Sinha, chief economist at CareEdge Ratings.
Only 8 of the 19 sectors under ISP recorded double-digit year-on-year growth in May. In April, 14 sectors saw double-digit growth.
The services sector remains a key driver of economic activity in India. It has demonstrated considerable resilience. The 19 sectors currently being covered under ISP account for around 60% of the formal services sector.
“While services output growth moderated in May, we expect the sector to maintain its underlying strength in the months ahead,” Sinha said.
Sectoral Trends
Accommodation and food services led the expansion in May as well. Output of the sector rose 27.4% in May, slower than 37.2% in April. Information Technology and computer related services, which has the highest weight in ISP of 22.5%, grew 10.3% in May as against 15.2% a month ago.
Railway transport and air transport were the only two sectors where output performance was better in May compared to April. Railway transport output grew 3.4% in May having contracted 0.4% in April.
Air transport output growth remained in negative territory, but the extent of the fall moderated in May. Air transport output fell 2.8% on year in May, against a 13.9% fall in April.
“Notably, Air Transport has declined compared to last year for the second consecutive month, likely reflecting the continued impact of disruptions to air travel amid conflict in West Asia and elevated fuel prices. However, the sector showed sequential recovery, supported by the onset of the travel season and some stabilisation in flight operations,” Sinha said.
Strong Q1 Momentum
According to DK Srivastava, chief policy advisor at EY India, average growth for eight key services accounting for nearly 87% of the total weight of the covered 19 services was 10.3% in May 2026.
“There are clear indications of a robust growth momentum for the 1Q 2026-27 with IIP growth in this quarter showing an average growth of 5.7% and ISP for the first two months of this quarter showing an average growth of 15.3%,” Srivastava said.