GDP & GVA
Notes
Gross Domestic Product (GDP) is the total market value of all final goods and services produced within a country's domestic territory in a year, irrespective of who owns the factors. Only final goods are counted to avoid double counting; intermediate goods are excluded.
Methods of estimating GDP
- Production (value-added) method: the sum of value added in each sector.
- Income method: wages, rent, interest and profit (compensation of employees, operating surplus and mixed income).
- Expenditure method: GDP = C + I + G + (X - M), i.e., private consumption, investment, government spending and net exports.
Gross Value Added (GVA)
- GVA = Value of output - Value of intermediate consumption. It measures the value added by each sector from the producer's side.
- GDP at market prices = GVA at basic prices + Product taxes - Product subsidies.
- Since January 2015, when India moved to the 2011-12 base year and revised its national accounts, GVA at basic prices is used to study sectors, and GDP at market prices is the headline figure; GDP at factor cost was discontinued. The base year is being updated again by MoSPI.
Related concepts
- GNP = GDP + Net Factor Income from Abroad (NFIA). NNP = GNP - Depreciation.
- India's fiscal year runs from 1 April to 31 March. Estimates are issued by the National Statistical Office (NSO), MoSPI: First Advance Estimates (January), Provisional Estimates (end of May) and quarterly estimates.
Basis | GDP | GVA |
|---|---|---|
Perspective | Consumer's (demand) side | Producer's (supply) side |
Prices | Market prices | Basic prices |
Taxes and subsidies | Includes product taxes, excludes subsidies | Excludes product taxes, includes subsidies |
Use | Overall size of the economy | Sector-wise performance |
Key Points
- GDP counts only final goods and services produced within the country in a year.
- GDP = C + I + G + (X - M).
- GVA = Output - Intermediate consumption; GDP = GVA + product taxes - product subsidies.
- GNP = GDP + NFIA.
- India uses the 2011-12 base year (since 2015); estimates by NSO.
MCQs
Q1. GDP at market prices equals:
(a) GVA at basic prices plus product taxes less product subsidies
(b) GVA at factor cost
(c) NNP minus depreciation
(d) GNP plus NFIA
Ans: (a) .
Q2. Which of the following is excluded from GDP calculation?
(a) Final goods
(b) Intermediate goods
(c) Services
(d) Exports
Ans: (b) . To avoid double counting.
Q3. GNP is equal to:
(a) GDP + NFIA
(b) GDP - NFIA
(c) NNP + depreciation only
(d) GVA + taxes
Ans: (a) .