GVA Methodology

National Income Estimation in India

• India’s Central Statistical Office ( under the Ministry of Statistics &
Programme Implementation)calculates the nation’s gross domestic product
(GDP).
• India’s GDP is calculated with two different methods, one based on
economic activity (at factor cost), and the second on expenditure (at market
prices).
• The factor cost method assesses the performance of eight different
industries.
• The expenditure-based method indicates how different areas of the
economy, such as trade, investments, and personal consumption, are
performing.
• CSO has adopted a new methodology for calculating the GDP since
2015 & (the base year is 2011-12 from 2004-05 )
• It provides both quarterly & annual estimates
• Sector wise estimates of gross value Added are calculated at basic price
& not factor cost
• It uses a new data series for the organized private sector, MCA-21. It
includes the data of all the companies registered with the ministry of
corporate affairs
( note: CSO & NSSO have been merged as NSO ( National Statistical
Office)
•  The sectoral classification provides data on eight broad sectors. These
are:
• 1) Agriculture, Forestry and Fishing;
• 2) Mining and Quarrying;
• 3) Manufacturing;
• 4) Electricity, Gas, Water Supply and other Utility Services;
• 5) Construction;
• 6) Trade, Hotels, Transport, Communication and Services related to
Broadcasting;
• 7) Financial, Real Estate and Professional Services;
• 8) Public Administration, Defence and other Services.
• GVA at factor cost + production tax – production subsidies = GVA at
basic prices

• GVA at basic Price + Product tax – Product Subsidy = GVA at market

Price.
• GVA at basic prices will include production taxes and exclude
production subsidies on the commodity.
• GVA at factor cost includes no taxes and excludes no subsidies
• GDP at market prices include both production and product taxes and
excludes both production and product subsidies.
• Production taxes/subsidies are independent of the quantity (volume)
of production. It is imposed even if the products are not produced
(Eg: tax —land revenues, stamps fees, registration fees & tax on the
profession; subsidies — subsidies to Railways, input subsidies to
farmers, subsidies to the village and small industries, administrative
subsidies to corporations or cooperatives, etc.)
• These are taxes paid & subsidies received irrespective of the level of
production
• GVA at basic price indicates the producer’s or the production cost
• Product taxes/subsidies depend on quantity produced. Product taxes
or subsidies are paid or received on per unit of product (Eg: tax —
excise tax, sales tax, service tax and import and export duties;
subsidies — food, petroleum and fertiliser subsidies, interest subsidies
given to farmers, households, etc)
• GVA at market price indicates the buyer’s price
• Earlier GDP was expressed as GDP at FC, producer end was given
preference as it took into account the prices received by the
producers
• Now GDP is expressed as GDP at MP, consumer end is given
preference as it takes into account market prices paid by consumers
• The new GDP has incorporated more comprehensive data on
corporate activity 
• Earlier government’s earnings (taxes – subsidies) were ignored, now it
is included in headline GDP (GDP at constant price)
• The method is at par with those used by international agencies like
IMF, World Bank etc.
• A sector-wise breakdown provided by the GVA measure helps
policymakers decide which sectors need incentives or stimulus and
accordingly formulate sector-specific policies.
• But GDP is a key measure when it comes to making cross-country
analysis and comparing the incomes of different economies.
•  GDP figure can be manipulated by changing subsidy disbursal or by
raising taxes.
• https://dbie.rbi.org.in/DBIE/dbie.rbi?site=home