What is Gross Value Added

Context

  • Recently the National Statistical Office (NSO), released its provisional estimates of national income for the financial year 2019-20.
  • The release also detailed the estimates of the Gross Value Added, or GVA, at basic prices for the four quarters of 2019 as well as the comparable quarterly data for the two preceding years.

About GVA

  • It is defined as the value of output minus the value of intermediate consumption and is a measure of the contribution to GDP made by an individual producer, industry or sector.
  • At its simplest it gives the rupee value of goods and services produced in the economy after deducting the cost of inputs and raw materials used.
  • GVA 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.
  • In the new series, in which the base year was shifted to 2011-12 from the earlier 2004-05, GVA at basic prices became the primary measure of output across the economy’s various sectors and when added to net taxes on products amounts to the GDP.
  • The GVA data is crucial to understand how the various sectors of the real economy are performing.
  • The output or domestic product is essentially a measure of GVA combined with net taxes.