Gross value added (GVA) is a measure of economic activity that is calculated by taking the value of all goods and services produced in a particular country or region in a particular period of time. It is a key indicator of a country’s economic growth and prosperity.

Formula for GVA:

GVA = NVA + Taxes – Subsidies

where:

• GVA is gross value added
• NVA is net value added
• Taxes are all taxes paid on goods and services
• Subsidies are all subsidies received for goods and services

Components of GVA:

GVA is composed of the following components:

• Primary production: The value of goods and services produced directly from natural resources, such as agriculture, mining, and forestry.
• Manufacturing: The value of goods and services produced by manufacturing industries, such as automotive, electronics, and clothing.
• Construction: The value of goods and services related to construction activities, such as building houses, roads, and bridges.
• Trade: The value of exports and imports of goods and services.

Uses of GVA:

• Measuring economic growth: GVA is a key indicator of economic growth. It is used to track changes in a country’s economic activity over time.
• Calculating GDP: GVA is used to calculate GDP, which is the total value of all goods and services produced in a country in a particular period of time.
• Understanding economic structure: GVA can be used to understand the structure of a country’s economy and to identify the sectors that are driving growth.

Examples:

• A country’s GVA in a particular year is $10,000. If its net value added is $8,000, then its taxes are $2,000.
• A manufacturing company’s GVA in a particular year is $20,000. If its cost of goods sold is $10,000, then its value added is $10,000.

Additional notes:

• GVA is a measure of economic activity at a particular point in time.
• GVA does not include indirect taxes or adjustments for inflation.
• GVA can be calculated for a specific industry, region, or country.