Gross Value Added (GVA) – Concept & Uses
Apart from GDP and GNP, modern statistics often use GVA to study sectoral performance.
1. Meaning of GVA
Gross Value Added (GVA) is the value of output produced minus value of intermediate consumption.
It measures the contribution of each producing unit or sector to the economy.
Formula:
GVA at basic prices = Value of Output − Intermediate Consumption
Basic Idea
GVA focuses on value added at each stage, avoiding double counting.
2. Relation between GVA and GDP
At the macro level:
Sum of GVA (all sectors) + Product taxes − Product subsidies = GDP at market prices
So, GVA by sector is building block of GDP.
3. Simple Numerical Illustration
Suppose a factory:
- Value of output = ₹1,000,000
- Value of intermediate consumption (raw materials, power, etc.) = ₹600,000
Then:
- GVA = 1,000,000 − 600,000 = ₹400,000
Calculating GVA
| Step 1 (Identify value of output (sales + change in stocks).) | |
| Add: Step 2 (Find value of intermediate consumption (raw materials, power, services).) | |
| Add: Step 3 (GVA = Value of output − Intermediate consumption.) |
4. Uses of GVA
- To measure sectoral performance (agriculture, industry, services).
- To analyse productivity of industries.
- Used by policy makers to see which sectors drive growth.
- Helps in international comparisons.
~55%
Share of Services in GVA (India, approx)
~25%
Share of Industry
~20%
Share of Agriculture
(Figures are indicative and change over time; students should check latest data for exams.)
5. Quick Revision Points
- GVA = value of output − intermediate consumption.
- Sum of GVA across sectors (with tax–subsidy adjustment) → GDP.
- Important for sector-wise analysis and policy.
6. Quiz Time 🎯
Test Your Knowledge
Question 1 of 5
1. GVA measures: