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The Reserve Bank of India switched back to gross domestic product (GDP) model from the gross value added (GVA) methodology to provide its estimate of economic activity in the country. The switch to GDP is mainly to conform to international standards and global best practices.
Government had started analysing growth estimates using GVA methodology from January 2015 and had also changed the base year to 2018 from January 2018. Even the Central Statistical Office (CSO] has started using GDP model as supply-side measure of economic activity as main measure of economic activities since January 15, 2018
The GVA methodology gives picture of state of economic activity from producers' side or supply side whereas the GDP model gives picture from consumers' side or demand perspective. Globally, performance of most economies is gauged in terms of GDP model. This is also approach followed by multilateral institutions, international analysts and investors because it facilitates easy cross-country comparisons.
GVA is linked as a measurement to gross domestic product (gdp), as both are measures of output. The relationship is defined as: GVA taxes on products - subsidies on products- GDP
For arriving at the new gross value added (GVA) at basic prices, production taxes, such as property tax, are added and subsidies are subtracted from GDP at factorcost. Put simply, GVA at basic price represents what accrues to the producer, before the product is sold.
The basic price is the amount receivable by the producer from the purchaser for a unit of a good or service produced as output minus any tax payable, and plus any subsidy receivable, on that unit as a consequence of its production or sale; it excludes any transport charges invoiced separately by the producer
Consider the following statement: GVA methodology gives pictures of state of economic activities from consumers side or demand's perspective. 1. 2. GDP methodologyv gives pictures of state of economic activities from producers side or supply side perspective. Which of the above statement is/are correct? a. Only 1 b. only 2 c. 1 and 2 d. neither 1 nor 2
MBA,PGDFM Author of Bhavishya Arthik Patrika(for Civil Services), worked in SBI group for 7 years, teaching indian economy to UPSC student