GROSS VALUE ADDED

GROSS VALUE ADDED

Subject : Economics

Context : The 7.2% fall in gross value added (GVA) for 2020-21, as per the National Statistical Office’s first advance estimates released on Thursday, would be the sharpest ever recorded in India.

Concept :

Gross Value Added

• In 2015, India opted to make major changes to its compilation of national accounts and decided to bring the whole process into conformity with the United Nations System of National Accounts (SNA) of 2008.
• The SNA is the internationally agreed standard set of recommendations on how to compile measures of economic activity.
• As per the SNA, GVA is defined as the value of output minus the value of intermediate consumption and is a measure of the contribution to growth made by an individual producer, industry or sector.
• It provides the rupee value for the number of goods and services produced in an economy after deducting the cost of inputs and raw materials that have gone into the production of those goods and services.
• It can be described as the main entry on the income side of the nation’s accounting balance sheet, and from an economics perspective represents the supply side.
• At the macro level, from a national accounting perspective, GVA is the sum of a country’s GDP and net of subsidies and taxes in the economy.
• Gross Value Added = GDP + subsidies on products – taxes on products
• Earlier, India had been measuring GVA at ‘factor cost’ till the new methodology was adopted in which GVA at ‘basic prices’ became the primary measure of economic output.
• GVA at basic prices will include production taxes and exclude production subsidies.
• GVA at factor cost included no taxes and excluded no subsidies.
• The base year has also been shifted to 2011-12 from the earlier 2004-05.
• The NSO provides both quarterly and annual estimates of output of GVA. It provides sectoral classification data on eight broad categories that includes both goods produced and services provided in the economy.