Gross Value Added (GVA)

As per the NSO, real GDP (Gross Domestic Product) in the full fiscal year was estimated to have expanded by 4.2% from a year earlier, the slowest pace of growth in 11 years. And GDP growth for the January-March quarter was pegged at 3.1%.
The release also detailed the estimates of the Gross Value Added, or GVA, at basic prices for the four quarters of 2019 as well as the comparable quarterly data for the two preceding years. Interestingly, the GVA numbers for the first three quarters revealed significant revisions from what the NSO had shared back in February, when it had announced estimates for the third quarter.
While initial estimates are routinely revised based on the updated availability of information, the extent of these revisions has come into focus since they point to a sharper and more widespread slowdown in economic activity over the course of the last financial year than had been previously revealed.

In 2015, in the wake of a comprehensive review of its approach to GDP measurement, India opted to make major changes to its compilation of national accounts and bring the whole process into conformity with the United Nations System of National Accounts (SNA) of 2008. As per the SNA, gross value added, is defined as the value of output minus the value of intermediate consumption and is a measure of the contribution to GDP made by an individual producer, industry or sector.
The sectoral classification provides data on eight broad categories that span the gamut of goods produced and services provided in the economy.
These are:
1) Agriculture, Forestry and Fishing;
2) Mining and Quarrying;
3) Manufacturing;
4) Electricity, Gas, Water Supply and other Utility Services;
5) Construction;
6) Trade, Hotels, Transport, Communication and Services related to Broadcasting;
7) Financial, Real Estate and Professional Services;
8) Public Administration, Defence and other Services.

As with all economic statistics, the accuracy of GVA as a measure of overall national output is heavily dependent on the sourcing of data and the fidelity of the various data sources in capturing the vast labyrinth of activities that constitute a nation’s economic life.
To that extent, GVA is as susceptible to vulnerabilities from the use of inappropriate or flawed methodologies as any other measure.
In a June 2019 research paper titled ‘India’s GDP Mis-estimation: Likelihood, Magnitudes, Mechanisms, and Implications,’ former Chief Economic Adviser Arvind Subramanian of Harvard University and the Peterson Institute for International Economics posited that the change in methodology and data sources when India switched its base year to 2011-12 had led to a significant overestimation of growth.
Specifically, he argued that the value based approach instead of the earlier volume based tack in GVA estimation had affected the measurement of the formal manufacturing sector and thus distorted the outcome.
The paper triggered much debate and prompted the Ministry of Statistics & Programme Implementation to assert in a response that the Ministry’s GDP estimates were based on “accepted procedures, methodologies and available data and objectively measure the contribution of various sectors in the economy”.