GDP OR GVA: TAKE YOUR PICK

The raging debate may boil down to what you are looking for

- INDIVJAL DHASMANA

The gross domestic product (GDP) series introduced in 2015 has triggered many debates. It changed not only the base year from 2004-05 to 2011-12 but also the methodology to compute the numbers. The debate over the relative relevance of gross value added (GVA) and GDP as the true indicator of economic performance is not new, but it has been accentuated by the recent national account numbers released by the statistics office.

Though the GVA growth, as expected, fell to 6.5 per cent during the third quarter of the current financial year (October-December 2023) from 7.7 per cent during the second quarter (July-September), the GDP growth rate rose to a six-quarter high of 8.4 per cent during October-December, compared to 8.1 per cent in July-September.

Also, the GVA growth pegged for 202324, by the second Advance Estimates, was modest, at 6.9 per cent for 2023-24 against the actual number of 6.7 per cent for the previous year. On the other hand, the projected GDP growth was way higher at 7.6 per cent against 7 per cent during this period. The projected GDP growth rate was also higher than the 7.3 per cent pegged by the first Advance Estimates, whereas the GVA growth was projected at the same level by both the Advance Estimates.

Factor cost, market prices

The concept of the gross value added was introduced by the GDP series with a base year of 2011-12. Prior to that, there used to be GDP at factor cost (GDPfc) and GDP at market prices (GDPmp). GDPmp still exists in the 2011-12 series and is the only indicator of GDP.

However, in the earlier series the main indicator of GDP growth for official purposes was GDPfc. It used to be taken, at constant prices, as the real GDP growth; GDPmp at current prices was considered for the nominal GDP growth.