Gross Value Added

Gross Value Added (GVA) measures the additional value created by a producer, industry or sector during an accounting period. It is calculated by subtracting the value of intermediate consumption from the value of output.

Basic calculation

The core identity is: GVA = value of output minus intermediate consumption. If a manufacturer produces goods worth ₹100 lakh using raw materials and services worth ₹60 lakh, its GVA is ₹40 lakh.

• Output means the value of production during the accounting period, including changes in inventories and own-account production where applicable.
• The subtraction prevents double counting, because the value of inputs may already be included in another producer's output.

What intermediate consumption includes

Intermediate consumption covers goods and services that are used up or transformed in production, such as raw materials, fuel and purchased business services.

• Compensation paid to employees is not intermediate consumption because it forms part of the income generated through production.
• Purchases of fixed assets are not intermediate consumption; their gradual loss of value is recorded as consumption of fixed capital.
• GVA is called gross because consumption of fixed capital has not been deducted. Deducting it gives net value added.

From sectoral GVA to GDP

In India's national accounts, sectoral GVA is commonly presented at basic prices. GDP at market prices is obtained by adding net taxes on products, meaning taxes on products minus subsidies on products, to aggregate GVA at basic prices.