RBI switches back to GDP from GVA

  • The Reserve Bank has decided to gross domestic product (GDP)methodology  to measure its growth estimates instead of the gross value added (GVA) methodology, citing global best practices.
  • The government had started analysing growth estimates using GVA methodology from January 2015 and had also changed the base year to 2018 from January. While GVA gives a picture of the state of economic activity from the producers’ side or supply side, the GDP model gives the picture from the consumers’ side or demand perspective.
  • According to the deputy governor of RBI, the decision to switch to GDP has been taken mainly to conform to international standards. Globally, the performance of most economies is gauged in terms of gross domestic product (GDP). This is also the approach followed by multilateral institutions, international analysts and investors, and primarily they all stick to these norms because it facilitates easy cross-country comparisons.
  • Even the Central Statistical Office had started using GDP as the main measure of economic activities since January 15 this year.

Source: The Hindu

Leave a Reply

Your email address will not be published. Required fields are marked *