{"id":2373,"date":"2021-02-18T19:31:59","date_gmt":"2021-02-18T14:01:59","guid":{"rendered":"https:\/\/blog.tickertape.in\/?p=2373"},"modified":"2021-02-23T16:47:23","modified_gmt":"2021-02-23T11:17:23","slug":"what-is-gva","status":"publish","type":"post","link":"https:\/\/www.tickertape.in\/blog\/what-is-gva\/","title":{"rendered":"What is GVA?"},"content":{"rendered":"\n<p>In our article<a href=\"https:\/\/www.tickertape.in\/blog\/gdp-growth-rate-contracted\/?ref=blog\"> Q1 GDP contraction: why, role of agriculture and rural sectors in GDP, and what next?<\/a>, we spoke about the GVA of the agriculture sector. In this article, we\u2019ll see what is GVA and its significance.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_66_1 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.tickertape.in\/blog\/what-is-gva\/#Introduction-to-GVA\" title=\"Introduction to GVA\">Introduction to GVA<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.tickertape.in\/blog\/what-is-gva\/#What-is-Gross-Value-Added\" title=\"What is Gross Value Added?\">What is Gross Value Added?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.tickertape.in\/blog\/what-is-gva\/#Importance-of-Gross-Value-Added\" title=\"Importance of Gross Value Added\">Importance of Gross Value Added<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.tickertape.in\/blog\/what-is-gva\/#How-is-Gross-Value-Added-calculated\" title=\"How is Gross Value Added calculated?\">How is Gross Value Added calculated?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.tickertape.in\/blog\/what-is-gva\/#GDP-vs-GVA\" title=\"GDP vs GVA\">GDP vs GVA<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Introduction-to-GVA\"><\/span><strong>Introduction to GVA<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>We know that the selling price of a good\/service minus its cost price is the profit earned by the producer. In other words, the selling price of a good should be greater than the cost price. Only then can the producer cover the expenses incurred in producing the good\/service and also earn a profit.<\/p>\n\n\n\n<p>That said, there can be instances when technology can make the production of a product\/service cheaper. Coupled with this, if the demand for the product is high, consumers wouldn\u2019t mind paying a slightly higher price to purchase it. This way, the value of the good\/service has suddenly increased. Gross Value Added (GVA) is such a rise in the value of goods\/services produced\/rendered across the nation.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What-is-Gross-Value-Added\"><\/span><strong>What is Gross Value Added?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Short for GVA, gross value added is the value of output minus the value of intermediate consumption of a unit. Value added refers to the contribution of labour and capital in the process of production. The sum of value added for all resident units is the gross domestic product (GDP). In other words, the sum of the GVA of all sectors of an economy during a year after adjusting for taxes and subsidies is the Gross Domestic Product (GDP).<\/p>\n\n\n\n<p>To put it simply, GVA is the additional value added to the raw material during the production process. For instance, when wood is transformed into kitchen furniture, value added will include all the expenses incurred in converting the raw material into finished goods.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Importance-of-Gross-Value-Added\"><\/span><strong>Importance of Gross Value Added<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Gross Value Added is the value of goods and services produced in a sector or industry of an economy. Higher gross value added is associated with a nation\u2019s higher level of economic well-being.<\/p>\n\n\n\n<p>However, in practice, the level of the economic well-being of a country can be calculated by dividing the GDP by the number of residents. Ergo, if two countries have the same GDP, they are not equal in terms of economic well-being. The country with a lower population is well-off than the country with a higher population.<\/p>\n\n\n\n<p>A sector-wise breakdown of GVA helps the government to identify the sectors that need stimulus or incentives to perform better. In contrast, GDP is a better application in conducting a cross-country analysis. GDP considers people&#8217;s tax payments, which may or may not contribute to the economy. For instance, GDP can also grow for reasons other than increased production.<\/p>\n\n\n\n<p>One such example is when there is an increase in the rate of tax, which results in higher tax collection. GVA, on the other hand, doesn\u2019t consider tax payments. It purely accounts for the value added in the creation of goods\/services in an economy. Naturally, a higher GVA suggests that the country has created more value in true sense.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"How-is-Gross-Value-Added-calculated\"><\/span><strong>How is Gross Value Added calculated?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Gross Value Added = Gross Domestic Product + taxes on products -subsidies on products<\/p>\n\n\n\n<p>GVA at basic prices = GVA at factor cost + taxes on products \u2013 subsidies on product<\/p>\n\n\n\n<p><strong>Note:<\/strong><\/p>\n\n\n\n<p>\u00b7&nbsp; \t<em>Basic price means the amount receivable for one unit of a good or service (output) by the producer from its purchaser less<\/em><strong><em> <\/em><\/strong><em>tax payable plus subsidy receivable<\/em><\/p>\n\n\n\n<p>\u00b7&nbsp; \t<em>Factor cost means the total cost of all factors of production used in producing a product or service<\/em><\/p>\n\n\n\n<p>GDP at market prices = GVA at basic prices + taxes on products \u2013 subsidies on product<\/p>\n\n\n\n<p><strong>Note:<\/strong><\/p>\n\n\n\n<p><em>Market price is the price at which a good or service is sold in the market. It includes the cost incurred in producing the product or service, taxes paid, and subsidies received<\/em><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"GDP-vs-GVA\"><\/span><strong>GDP vs GVA<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>GVA deducts the government\u2019s indirect taxes and adds subsidies to the GDP. It means GVA considers the money spent on the economy whereas, GDP measures the number of goods and services produced in the country.<\/p>\n\n\n\n<p><br><\/p>\n","protected":false},"excerpt":{"rendered":"<p>GVA is the additional value added to the raw material during the production process. For instance, when wood is transformed into kitchen furniture, value added will include all the expenses incurred in converting the raw material into finished goods<\/p>\n","protected":false},"author":27,"featured_media":2374,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"_lmt_disableupdate":"","_lmt_disable":"","footnotes":""},"categories":[10,1744],"tags":[104],"acf":[],"modified_by":"Aradhana Gotur","jetpack_featured_media_url":"https:\/\/www.tickertape.in\/blog\/wp-content\/uploads\/2021\/02\/GVA-1.png?wsr","_links":{"self":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/2373"}],"collection":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/users\/27"}],"replies":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/comments?post=2373"}],"version-history":[{"count":3,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/2373\/revisions"}],"predecessor-version":[{"id":2381,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/2373\/revisions\/2381"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/media\/2374"}],"wp:attachment":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/media?parent=2373"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/categories?post=2373"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/tags?post=2373"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}