Gross Value Added (GVA)

Subject – Economy

Context – Economy grows 20.1% in Q1, lags pre-COVID level. ‘GVA during April to June rose 18.8%’.

Concept –

In economics, gross value added (GVA) is the measure of the value of goods and services produced in an area, industry or sector of an economy.
Gross value added is the value of output minus the value of intermediate consumption;
It is a measure of the contribution to GDP made by an individual producer, industry or sector;
GVA is a very important measure, because it is used to determine gross domestic product (GDP).
In comparing GVA and GDP, we can say that GVA is a better measure for the economic welfare of the population, because it includes all primary incomes.
GVA is sector specific, and GDP is calculated by summation of GVA of all sectors of economy with taxes added and subsidies are deducted.
While GVA gives a picture of the state of economic activity from the producers’ side or supply side, the GDP gives the picture from the consumers’ side or demand perspective.
Both measures need not match because of the difference in treatment of net taxes.

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.