RBI decides to use GDP instead of GVA to measure economic activity

The Reserve Bank of India has decided to use Gross Domestic Product (GDP), instead of Gross Value Added (GVA) to measure economic activity in the country. 

The change, said Viral Acharya, deputy governor, is to conform with international practice, for ease of comparison. Globally, the performance of economies is gauged in terms of GDP. This approach is also taken by multilateral institutions, international analysts and investors.

GVA gives a picture of the state of economic activity from the producers' side or the supply side. GDP gives the picture from the consumers' side or the demand perspective.

Primarily, they all stick to this norm because it facilitates country comparisons. Here, the Central Statistical Office has been using GDP as the main measure of economic activity since January 2015. So, though there are good economic reasons to employ GVA as the supply-side measure of economic activity, it has been decided to switch to GDP, said Acharya.  

India’s economic growth is expected to strengthen from 6.6 per cent in 2017-18 to 7.4 per cent in 2018-19. Growth trends across the four quarters are expected to be 7.3 per cent in Q1, 7.4 per cent in Q2, 7.3 per cent in Q3 and 7.6 per cent in Q4.

 For 2019-20, the structural model estimates indicate growth at 7.7 per cent, with quarterly growth rates of 7.4-7.9 per cent, assuming a normal monsoon and no major exogenous events or policy shock.