RBI switched back to GDP model from GVA model


The Reserve Bank of India switched back to gross domestic product (GDP) model from the gross value added (GVA) methodology to provide its estimate of economic activity in the country. The switch to GDP is mainly to conform to international standards and global best practices.

i.Viral Acharya, deputy governor of RBI said that, this change has been done to confirm with international practice and for ease of comparison.
ii. Worldwide, the performance of economies is measured in terms of GDP. Multilateral institutions, international analysts and investors also follow this approach.
iii. GVA gives the picture of the state of economic activity from the producers’ side or the supply side. GDP provides the picture from the consumers’ side or the demand side.
iv. The Central Statistical Office has been employing GDP as the main tool to measure economic activity since January 2015.

Globally, performance of most economies is gauged in terms of GDP model. This is also approach followed by multilateral institutions, international analysts and investors because it facilitates easy cross-country comparisons.