RBI to focus on GDP to measure economy rather than the proposed GVA

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With the country’s economic growth expected to be positive as experts believe that it will grow from 6.6% to 7.4% in the Financial Year of 2018-2019, the Reserve Bank of India has decided to stick to measuring the economy using GDP (Gross Domestic Product) rather than shift to GVA (Gross Value Added). For those new to the terms, GDP is used to reflect the economic growth from the perspective of the consumer or supply and demand, whereas GVA is used to measure or reflect the economic status of the country from producer’s or supplier’s picture. According to Viral Acharya, deputy governor of the Reserve Bank of India, they have decided to use the GDP to measure the economic growth of the country as international analysts, investors and institutions apply the GDP and not the GVA to measure the growth of their respective countries. Hence, from the perspective of the Reserve Bank of India, using the GDP instead of the GVA will help them make comparisons between countries on the economic growth factor.

RBI-GDP-GVA
Reserve Bank of India chooses GDP to measure economic growth

As already mentioned above, the economic growth of India is expected to rise from 6.6% to 7.4% in the Financial Year of 2018-2019. Provided that the monsoons are as expected, there are no calamities or disastrous global events, the GDP of the country is expected to be 7.3% in the first quarter of the 2018-2019 FY, 7.4% in the second quarter, back to 7.3% in the third quarter and finally 7.6% in the last quarter of the financial year. Analysts predict that the growth rate following the 2018-2019 Financial Year will be from 7.4% to 7.9% in the 2019-2020 Financial Year.

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