GVA Method Of GDP Calculation: Every country has its economy which must be calculated for the growth of a nation. That is to say, the economic growth of the nation is calculated based on certain factors like GDP and GVA. The nation’s economy is one of the important factors that deal with the progress of the country among the world nations. Therefore, it is necessary that a country work on such factors for improving its value at the global level. In India, we calculate the Gross Value Added (GVA) by the factor called Gross Domestic Product (GDP). In this post, one can know the simplest method of gross value added GVA method of GD calculation.
“GVA Method Of GDP Calculation” Terms You Should Know For Better Understanding:
The Gross Value Added (GVA) is a metric that is used to measure economic productivity. That is to say, it is a measurement that contributes to the corporate and other company’s contribution to the overall economic growth of a country. Moreover, the total output and income of the company are measured by the value. The output of the country is the gross value added of the country which is the difference between the net output and gross output. Following are the important terms used to know the terms for better understanding
- GVA: Gross Value Added is the total output and income of an economy that helps in providing the rupee value according to the cost of goods and services. This is calculated by the sum of GDP and a total of taxes or subsidies in the economy.
- GDP: Gross Domestic Product is the economic output of the country from the perspective of the consumer. This value is a sum of various elements like a gross investment of an economy, foreign trade, private consumption, and the total foreign trade.
- Difference between GDP and GVA: These two are entirely different terms and therefore they should not be confused much. The GVA is the perspective of the economy from the manufacturer or producer’s side. On the other hand, the GDP is the perspective of the economy from the side of the consumer. However, these two are not the same and therefore the measures of both these economies are different.
Calculation Of GVA from GDP
The GDP can be adjusted based on the GVA value which is the key indicator of the national economy is calculated. It is one of the main factors that are used to Calculate the GVA from GDP. The industry level of the uses the GVA to measure the amount of money a product or service that is used for a contribution towards the meeting of the company costs. The GVA can be calculated by the total GDP and the difference between the subsidies and taxes on products. Following is the calculation of the GVA
- Where GVA is Gross Value Added
- GDP is Gross Domestic Product
- SP is Subsidies On Product
- TP is Taxes On Product
A top example of the GVA calculation of the firm
Let us consider a country that has the 500 Billion USD private consumption, 250 billion USD gross investment, 150 billion USD government investment, imports and exports of USD 125 Billion and USD 120 billion respectively, and the total taxes and subsidies of 5% and 10% respectively.
Using the above data, the gross value added can be calculated which is to say the total of private consumption, gross investment, government spending, government investment, and the exports or imports value.
- Therefore, the GDP is calculated as 500+250+150+250+(150-125), and the total GVA is USD 1.175 trillion.
- The total subsidies on products and taxes on products are calculated to be USD 25 billion and USD 50 Billion. Therefore, the GVA is calculated as,
- USD 1.75 trillion+ USD 25 billion – USD 50 Billion = USD 1.15 trillion
To sum up
The Gross Value Added GVA value of the nation is an important factor for an economy to improve national development. Therefore, the value depends on the various factors that provide the GDP, subsidy, and other taxes. The GVA measurement helps in providing the economy and helps in understanding the concept in every firm. That is to say, every firm helps in providing the overall GVA value of an entire economy of the nation.