The country and the equity markets are looking forward to the all-important numbers on the Indian economy, that are set to be released on May 31. These Q4 data will shine a light on the productivity of the Indian economy.
What is a GVA?
This is also a time, when many analysts are ruminating over the juxtaposition of the GDP and the GVA numbers. Now we all know, what GDP stands for, the Gross Domestic Product of a country in layman's terms, is the total value of the goods and services produced in a country, in a given period of time.
This measure introduced by Simon Kuznets, which was then known as National Income, gives an idea of the productivity of the country, and is not a complete, or cannot give a complete picture of the welfare of the state and people of that state.
The GVA is the measure of the value added to the segment, may it be a sector, region, or economy at large, by institutions, may it be corporations, or the industry or sector. | Freepik
When we look at GVA or Gross Value Added, it is one of the components that goes in the formulation of GDP numbers. The GVA is the measure of the value added to the segment, may it be a sector, region, or economy at large, by institutions, may it be corporations, or the industry or sector.
The GVA in other words, is defined as the value of output, excluding the value of intermediate consumption. It is the rubric to gauge the 'contribution' to 'growth' made by the aforementioned elements to the economy. Here, it provides the pecuniary value, in this case, the rupee value of goods and services created, after separating the cost of input and raw materials in production.
The GDP-GVA Disparity
GVA can be calculated by misusing the taxes out of the GDP, along with the subsidies. Here, taxes and subsidies are not considered to be part of the value added to production.
Recently, all the major rating agencies, along with other financial institutions, have awarded the Indian economy a positive rating, and have predicted steady growth rate for this financial year. Meanwhile, some analysts are pointing at the said distinction or discrepancy between the GDP and GVA numbers.
India's GDP is currently growing at 8.4 per cent, compared to its GVA rate of 6.5 per cent. | Pixabay
India's GDP is currently growing at 8.4 per cent, compared to its GVA rate of 6.5 per cent. This according to analysts, is a result of growing deviance in consumption and production. While consumption expenditure is resilient, the production half may fall short, leading to rise in commodity prices, which eventually would percolate into an uptick in inflation numbers as well.
The upcoming Southwest monsoon and its progress could define the route destined, as the agricultural sector and its production would depend on that. For now, the IMD, owing to the potential La Nina phenomenon, has predicted normal monsoon activity, which in turn may aid agriculture and, in turn, would aid the production side as well.
