GDP and GVA

➖ For any financial year, the two main variables of national income are GDP and GVA (or Gross Value Added).

➖ The GDP calculates India’s national income by adding up all the expenditures in the economy while the GVA calculates the national income from the supply side by looking at the value-added in each sector of the economy.

🔺 While both the variables measure national income, they are linked as follows:

✔️ GDP = (GVA) + (Taxes earned by the government) — (Subsidies provided by the government).

➖ As such, if the government earned more from taxes than what it spent on subsidies, GDP will be higher than GVA.

➖ If, on the other hand, the government provided subsidies in excess of its tax revenues, the absolute level of GVA would be higher than the absolute level of GDP.