Gross value added
In economics, gross value added (GVA) is the measure of the value of goods and services produced in an area, industry or sector of an economy. In national accounts GVA is output minus intermediate consumption; it is a balancing item of the national accounts' production account.
Relationship to gross domestic product
As the total aggregates of taxes on products and subsidies on products are only available at whole economy level, Gross value added is used for measuring gross regional domestic product and other measures of the output of entities smaller than a whole economy. Restated,
- GVA = GDP + subsidies - (direct, sales) taxes
Over-simplistically, GVA is the grand total of all revenues, from final sales and (net) subsidies, which are incomes into businesses. Those incomes are then used to cover expenses (wages & salaries, dividends), savings (profits, depreciation), and (indirect) taxes.
GVA is sector specific, and GDP is calculated by summation of GVA of all sectors of economy with taxes added and subsidies are deducted.
Disadvantages of GVA
Comparison over time is difficult.
Advantages of GVA
- Better coverage.
- Internationally comparable figure.
- Better market condition projection globally, especially in case of FIIs.
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