New Services Index out; 14 sectors grow strongly
COMING SOON. Work underway to complete ISP for health & residential education, credit growth
Shishir Sinha New Delhi
The government on Tuesday unveiled the trial Index of Service Production (ISP), a new high-frequency indicator that showed formal services activity remained resilient in April despite the West Asia conflict, with 14 of the 19 sectors tracked recording double-digit growth over the previous year.
The inaugural monthly series, with 2024-25 as the base year, covers 19 sub-sectors including air transport, retail trade, accommodation and food services, road and air transport, telecommunications and banking, which together account for around 60 per cent of India’s services sector.
ISP FOR SUB-SECTORS The services sector contributes more than half of the country’s gross value added (GVA). With the launch of ISP, all three broad sectors of the economy — services, industry and agriculture — will now have regular monthly or quarterly production indices.
Anantha Nageswaran, Chief Economic Advisor, said the new series will help put the services sector on the same footing as industrial production data. "The new series will help policymakers identify shifts in the services sector much sooner," Nageswaran said at a media briefing in New Delhi.
Releasing the trial series would allow the dataset to be tested and validated by users before it is transformed into a regular index, he added. He said the new index would help policymakers identify slowdowns in the services sector much sooner. "When a sector slows, we would like to know within weeks and not after months. The inaugural series of the Index does just that," he said.
Nageswaran said that while the ISP measures production volumes, the underlying data are reported in value terms and, therefore, depend on appropriate deflation. He added that the coverage of the index would be expanded over time.
‘HOME’ TOPS The first set of data showed accommodation and food services recorded the highest annual growth at 37.2 per cent in April, followed by retail trade (30.8 per cent), administrative and support services (28.7 per cent) and real estate activities (27.7 per cent).
Transport was the weakest-performing segment, with air transport contracting 13.9 per cent and rail transport seeing a 4.1 per cent decline to an index level of 99.59. Higher fuel prices and global supply chain disruptions have weighed on this activity.
The Ministry added that the ISP uses a differentiated approach for compiling sub-sector indices based on the nature and availability of data, drawing primarily on monthly indicators, sample numbers and the Annual Survey of Unincorporated Enterprises (ASUE).
The Ministry said the ISP would be of great value to services enterprises because it would help them in better business planning and administrative data. The ISP will be released on the 20th of every month, with wider transitions and expansion in coverage as more data sources become available.
A Japanese wake-up call for America
CRISIS AHEAD. Japan's currency and bond-market woes are a result of its unsustainable public debt. The other Western nations must pay heed
Desmond Lachman
Japan appears to be on the cusp of a full-blown currency and bond-market crisis. Although the Japanese authorities spent more than $70 billion in May to prop up the yen, the currency has slumped to a 40-year low and is estimated to be at least 15 per cent undervalued against the US dollar.
Meanwhile, Japanese long-term bond yields have surged to multi-decade highs following the end of the Bank of Japan’s (BoJ) negative-interest-rate policy and signs of Japan addressing the underlying causes of its currency and debt problems. With the yen remaining vulnerable at anytime soon, there is every reason to believe that the BoJ will have to hike interest rates again.
Japan’s current challenges should be a wake-up call for other countries that appear to be on unsustainable fiscal paths, not least the US, as well as France, Italy, and the UK. After all, an economic and financial crisis in the world’s third-largest economy will draw attention to other countries facing similar issues. That is what happened in the case with the Asian currency crisis in 1997-98, when Thailand’s problems triggered similar devaluations in Indonesia, Malaysia, the Philippines, and South Korea.
It was also the case with the eurozone sovereign-debt crisis triggered similar crises in Ireland, Italy, Portugal, and Spain.
UNSUSTAINABLE PUBLIC DEBT What has amplified concern over Japan’s currency and bond market woes is its unsustainable public finances and its difficulty in getting its inflation back down to the US. At 230 per cent, Japan has by far the highest debt-to-GDP ratio among G7 countries, and it still runs a 3.5 per cent primary deficit, which adds to the existing debt.
Combined with a shrinking and aging population, as well as a stagnant economy, the prospect of Japan targeting a single-year primary budget surplus via a vague medium-term debt-reduction target is not something to keep markets at ease about the country’s long-term debt trajectory.
It does not help that Sanae Takaichi, a leading LDP politician, has expressed uninterested in putting the country on a sounder budget footing anytime soon. Among her first economic-policy moves was to adopt a supplemental budget that increased energy subsidies in response to the shock to international oil prices from the closure of the Strait of Hormuz.
Japan’s large debt burden makes it difficult for the BOJ to raise interest rates even at a time when inflation appears to be accelerating.
Tightening monetary policy would only exacerbate the country’s public-finance problems by increasing competitive moves. While the US Federal Reserve’s short-term interest rate is at 5.5 per cent, the BoJ’s policy interest rate is at just 1 per cent.
This large interest-rate differential gives investors an incentive to borrow cheaply in Japanese yen and lend in higher-yielding dollar-based assets (the “carry trade”).
JAPAN’S OPTIONS This will remain the case as long as the yen continues to depreciate.
As Herbert Stein’s famous aphorism bears repeating: If something cannot go on forever, it will stop. In principle, Japan could get out of its unsustainable debt path in an orderly manner if the government made a preemptive and timely economic-policy U-turn to avert a currency and bond-market crisis. Or it could do so in a disorderly manner if a loss of investor confidence forced the government’s hand.
That is what happened in the UK in 2022 in response to Prime Minister Liz Truss’s ill-advised budget measures. Unfortunately, all available signs suggest that Japan is headed in this direction. A deepening Japanese currency and bond-market crisis is bound to draw attention to other countries with troubling public finances, and especially to the US.
At around 100 per cent, the US debt-to-GDP ratio is considerably lower than that of Japan; but the country is on track to maintain a budget deficit of more than 6 per cent of GDP as far as the eye can see. That means its debt ratio will soon reach its highest level since the end of World War II.
Three additional factors are making the US more vulnerable to a bond-market crisis. Consider, for example, that foreigners own around one-third of all Treasury bonds.
Second, the US government is increasingly reliant on hedge funds rather than more stable holders (like insurance companies and pension funds) to finance its deficits.
The bottom line is that highly indebted nations like the US, France, Italy, and the UK all have good reason to address their shaky public finances. The prospect of spillovers from an early Japanese currency and bond-market crisis could make the task only more urgent.
The writer is a senior fellow at the American Enterprise Institute, is a former deputy director of the International Monetary Fund’s Policy Development and Review Department, and that of the emerging-market economic strategist at Salomon Smith Barney. © Project Syndicate, 2026. www.project-syndicate.org
Direct tax mop up jumps 16% to ₹6.5 lakh crore so far in FY27; STT, corporate tax lead surge
Shishir Sinha New Delhi
Driven by a surge in corporate tax, India's net direct tax collections grew by more than 16 per cent between April 1 and July 10, the Income Tax Department announced on Tuesday. The strong momentum has raised expectations that the government will meet or exceed its fiscal targets as outlined in the Budget Estimates.
For the current fiscal year (FY27), the government has set a direct tax collection target of ₹26.97 lakh crore, representing a 15 per cent growth over the ₹23.40 lakh crore collected in FY26. Early data indicate a strong start, with overall net collections already crossing 24.5 per cent of the full-year goal.
The momentum was led by net corporate tax collections, which surged nearly 22 per cent to approximately ₹2.40 lakh crore, while net personal income tax (non-corporate) collections rose around 12 per cent to ₹3.85 lakh crore. Additionally, Securities Transaction Tax (STT) receipts jumped 66.5 per cent to exceed ₹26,000 crore.
COS' PROFIT IMPACT Comparing the net collection of corporate tax with overall net direct tax collection, Rohinton Sidhwa, Partner at Deloitte India, said: "This indicates that Indian corporate earnings do not seem to have been hit by the war, or a slowdown and profits seem to be largely insulated. STT also seems to show a healthy increase driven by higher volumes traded due to the volatility in the stock market".
According to a partner at Price Waterhouse & Co, non-corporate tax collections have also maintained a healthy momentum. "Gross non-corporate tax collections are up 15.02 per cent and net collections have grown 11.66 per cent. These collections indicate compliance continues to be buoyantly rising... supported by strong market activity and the revised STT rates on futures and options," he said.
Significantly, net corporate tax collections have already reached around 19.5 per cent of the Budget Estimates, while net non-corporate tax collections stand at 27.6 per cent. "This is a good and encouraging close to the first quarter, with three more quarters still ahead," he said. It may be noted that non-corporate taxpayers include individuals, HUFs, firms, AoPs, BoIs, local authorities and artificial judicial person.
GROWTH DRIVERS Jayesh Sanghvi, Tax Partner at EY India, said the notable feature of the current trend is the stronger growth in corporate tax collections relative to personal income tax collections and healthy advance tax payments by corporates. At the same time, STT collections signal continued investor participation, plus improvements in compliance and formalisation, while the sharp increase in STT collections signals continued capital market depth and robust personal income despite geopolitical risk premiums weighing on global portfolios.
"Looking ahead, the data suggest that while the Strait of Hormuz tensions, tariff uncertainty, and oil price volatility may continue to challenge the government's projections, India's fiscal engine is proving structurally more resilient than the macro headlines suggest," he said.
Trump’s great Hormuz cash machine
US President wants ships traversing the strait to pay $15 for every barrel they carry. The sums involved are eye-watering.
By Paran Balakrishnan
Has anyone done the math on President Donald Trump’s latest demand for cash payments from ships sailing through the Strait of Hormuz?
Trump says ships carrying oil through the world’s most important energy chokehold should pay the US $15 for every barrel they carry. His argument is simple: if the US Navy is keeping the sea lanes open, America should be paid for the service. “We’ll become the guardian of the world’s energy supply, and we should be reimbursed for that,” he said.
It sounds like a joke, but is it? A very large crude carrier, or VLCC, typically carries two million barrels of oil. Under Trump’s proposal, every tanker passing through the strait would be handed a bill for $30 million.
Before the Israel-US war erupted, some 21 million barrels of oil and gas passed through the strait. Multiply that by $15 and the sums involved could very quickly become astronomical. The US could make $315 million every day, or more than $100 billion a year from the efforts of sailors patrolling those waters. Did someone mention shadow-toll?
Oil markets, meanwhile, are once again kicking like a bucking bronco. Brent crude, the global benchmark, shot up $7.40 a barrel last week, spurring fears of a fresh round of inflation. Then Iran and the US resumed shooting through each other once more, touching $87 a barrel on Tuesday. A year ago, Brent was at $74. It is now well below the $118-a-barrel peak hit earlier this year.
The current moment at least, is not clutching its worry beads. The country has a much better foreign exchange position than during previous energy shocks. In June, India imported more crude oil than ever before, with Russia accounting for 32 per cent of those purchases. “India’s crude import basket is much more diversified than it was a few years ago,” says Sumit Ritolia, senior analyst at Kepler, the shipping data and analytics firm.
Russian crude continues to anchor a large share of India’s imports. But just as the old saying goes, it’s an ill wind that blows nobody any good. Ukraine’s drone attacks on Russian refineries have had the unintended effect of pushing more Russian crude onto international markets. India has been standing at the front of the queue to buy it.
The picture is less comfortable when it comes to LPG and LNG, but here too India has been scouring global markets for alternatives. LPG imports are estimated at 1.4 million tonnes in June, significantly above normal, with a substantial amount coming from the US. The same trend can be seen in LNG.
That naturally raises another question: just how expensive has India’s global energy shopping spree become? Before the Iran war, India was spending $10-13 billion a month on imported crude. In April and May put together, India paid $35.5 billion, nearly 70 per cent more than in the same period a year earlier.
BUYING FROM NORTH AMERICA The drawback, meanwhile, in buying from North America is obvious. Gas shipped from there has a long journey to make before reaching Indian ports, and transport costs inevitably rise with every extra nautical mile travelled.
For years, Qatar has supplied 40 per cent of India’s LNG imports. But that equation may begin to change. The UAE is constructing a huge LNG export facility at Al Ruwais in Abu Dhabi, and India is seen as one of its biggest customers. There’s another silver lining to the crisis, although perhaps not one that will cheer motorists or households. India’s exports of refined products have climbed to their highest monthly levels of the year. Indian refineries have been exporting everything from jet fuel to diesel and gasoline.
Another important development is taking place in the UAE. Abu Dhabi is moving ahead with plans to expand Fujairah and Khor Fakkan, two ports on the Gulf of Oman that sit outside the strait altogether. Fujairah’s expanded facilities could be operational within 18 months.
The attraction is obvious. Cargoes unloaded there would bypass the strait completely before being moved onwards across the UAE by pipeline, road and rail links. Iran, however, has warned its own ports could become targets for drone attacks in any future war.
For Asia, however, the greatest danger may lie in the risk of a double whammy. What happens if the Houthis decide this is the moment to re-enter the conflict and once again attack Red Sea shipping?
If disruption in the strait were combined with renewed attacks in the Red Sea, two of the world’s most vital energy arteries could come under pressure at precisely the same moment, making energy far more expensive. India’s economy really might find itself up a creek without an outboard motor, desperately searching for a paddle.
Wholesale inflation in June surges to 9.9%
GROWTH DRIVERS. Food articles, metals and chemicals push up prices
Our Bureau New Delhi
With the rise in fuel and food prices, wholesale inflation based on the Wholesale Price Index (WPI) surged to a 15-month high of 9.9 per cent in June from 9.7 per cent in May. At the same time, the output Produce Price Index (PPI) inflation too rose to 9.6 per cent against 9.4 per cent in May.
"Across groups, ‘mineral oils’ (containing petroleum products), ‘food articles’, ‘chemicals and chemical products’, ‘basic metals’, and ‘manufacture of chemicals’ products, have been major drivers of WPI inflation in June," an official statement said.
The June print is the fourth monthly series with the base year of 2024-25. The consumer price index-based inflation, too, had surged to a four-month high of 4.38 per cent in June, as higher food prices offset the previous month's fall.
"June WPI inflation rose further on account of higher inflation in ‘primary articles’ (adding 46 bps to headline, led by higher food articles)," said Aditi Nayar, Chief Economist at ICRA.
OIL PRICES Echoing the same sentiments, Madan Sabnavis, Chief Economist with the Bank of Baroda, said that oil prices had come to the low seventies during the last few days of June but since then they have crossed the $80 mark; it looks like there will be no administered action taken to cool down prices and the status quo on fuel prices will remain for some time.
Hence, “WPI inflation may be expected to be in the range of 9-10 per cent for the next couple of months, too. A lot will also be dependent on the monsoon and the kharif outcome,” he said.
MONSOON EFFECT Adding to this, Rajni Sinha, Chief Economist with CareEdge, said that on the domestic front, inflation risks stem from the weather related uncertainty and the increasing likelihood of a weak monsoon strengthening during the soon-soon season. Food prices, particularly vegetables, pulses and edible oils, remain the most vulnerable. "Any sustained disruptions and warrant an increase in prices, taking these factors into account, we project WPI inflation to average 8.7 per cent in FY27,” she said.
However, she noted that India is relatively better positioned than others to handle such episodes, supported by higher reservoir levels and comfortable foodgrains stocks.
Moreover, “historical experience suggests that such weather-related shocks result in a sharp rise in food inflation. The extent of any increase will depend on government supply-side interventions as well as the temporal distribution of rainfall,” she concluded.
India faces potential natural gas supply cut of up to 1.5 mt/month
Rishi Ranjan Kala New Delhi
The West Asia conflict has adversely affected the LNG supply chain, and as a result, India along with other South Asian countries may face supply shortages. India is facing an estimated LNG shortfall of around 1.5 million tonnes (mt) per month.
Wood Mackenzie in its latest commentary pointed out that Qatar accounted for nearly 90 per cent of Qatari and the UAE LNG shipments transiting the Strait of Hormuz (SoH) in 2025. Within Asia, South Asia is most exposed.
SUPPLY DISRUPTION The South Asian picture is particularly concerning, with the Wood Mackenzie report saying that India, Pakistan and Bangladesh are navigating supply disruption in markets that remain structurally tight. In India, spot prices are now at levels that are translating directly into demand curtailment, industrial fuel switching and, in the most acute cases, fertiliser plant shutdowns and power sector load shedding.
"India faces potential supply curtailments of up to 1.5 mt per month, the largest location has been diverted to essential sectors," the report said.
Urea output is being squeezed by Qatari LNG curtailments. Energy-intensive industries such as refining and power plants are also seeing cuts and switching to propane, fuel oil and naphtha at pace.
Gramodyam to encourage rural entrepreneurs
Our Bureau Bengaluru
The National Bank for Agriculture and Rural Development (Nabard) launched ‘Gramodyam’, an entrepreneurship development programme to unlock the potential of rural India, on its 45th Foundation Day on Monday.
Launched by Shaji KV, Chairman of Nabard, the initiative is being implemented in collaboration with the National Skill Development Corporation (NSDC) and the Union Ministry of Skill Development and Entrepreneurship.
DIGITAL-FIRST It will be implemented through a digital-first approach. Gramodyam seeks to identify, nurture, mentor and empower aspiring entrepreneurs from rural India in industry-relevant skills, entrepreneurial competencies and access to essential support systems. By providing young innovators with converted ideas into viable enterprises, it aims to transform rural opportunities into pathways for sustainable economic growth and employment generation.
EQUITABLE OUTREACH Designed as an inclusive, digital-first, hybrid delivery model, Gramodyam aims for equitable outreach.
Through a combination of digital platforms, social media, community-based outreach and on-ground mobilisation, aspiring entrepreneurs will be enrolled and guided through a structured five-stage journey, a Nabard media statement said. Gramodyam will be conducted under e-KYC verification to ensure authenticity. During the pilot phase, it aims to support the creation of at least 50,000 new entrepreneurs over three years.
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