Gross Value Added (GVA) is an economic concept that measures the contribution of an individual producer, industry, or sector to the overall economy. It is defined as the value of output less the value of intermediate consumption, representing the value created after deducting the cost of inputs and raw materials used in the production process. GVA is considered a supply-side measure, offering a sectoral breakdown of economic activity, which helps policymakers identify which sectors require incentives or stimulus.
The concept's origin is rooted in the United Nations System of National Accounts (SNA), specifically the SNA 2008 framework, which India adopted to align its economic measurement practices with global standards. The Central Statistical Office (CSO), now part of the National Statistical Office (NSO), revised its national accounts methodology in January 2015. This revision solved the problem of international comparability and replaced the earlier practice where Gross Domestic Product (GDP) at factor cost was the main parameter for measuring the country's overall economic output.
The key mechanism involves calculating GVA at basic prices, which became the primary measure for sectoral output. GVA at basic prices includes production taxes (like land revenue) and excludes production subsidies, differing from the older GVA at factor cost, which included no taxes and excluded no subsidies. GVA connects directly to GDP through the formula: GDP = GVA + Taxes on Products – Subsidies on Products. This means GDP is the sum of GVA across all sectors plus net taxes on products. The 2015 revision also shifted the base year for national accounts from 2004-05 to 2011-12.