RBI dumps GVA model, switches back to GDP to measure economy

By: |
Mumbai | Updated: April 5, 2018 7:16:29 PM

The Reserve Bank today switched back to the gross domestic product (GDP)-based measure to offer its growth estimates from the gross value added (GVA) methodology, citing global best practices.

RBI,  GVA model, gdp, Viral Acharya, Central Statistical Office, news on RBI, latest new on rbiDeputy governor Viral Acharya today said the switch to GDP is mainly to conform to international standards. (Reuters)

The Reserve Bank today switched back to the gross domestic product (GDP)-based measure to offer its growth estimates from the gross value added (GVA) methodology, citing global best practices. Government had started analysing growth estimates using GVA methodology from January 2015 and had also changed the base year to 2018 from January. While GVA gives a picture of the state of economic activity from the producers’ side or supply side, the GDP model gives the picture from the consumers’ side or demand perspective.

Deputy governor Viral Acharya today said the switch to GDP is mainly to conform to international standards. “Globally, the performance of most economies is gauged in terms of gross domestic product (GDP). This is also the approach followed by multilateral institutions, international analysts and investors, and primarily they all stick to this norms because it facilitates easy cross-country comparisons,” Acharya told reporters at the customary post-policy presser.

Even the Central Statistical Office (CSO) has started using GDP as the main measure of economic activities since January 15 this year, he added. “So, even though there are good economic reasons to employ GVA as the supply side measure of economic activity, we have decided to switch to GDP-based model,” Acharya said.

In the first bi-monthly policy of the new fiscal year 2018-19 wherein it left the key rates unchanged at 6 per cent citing rising inflation worries in the first half, RBI said GDP is projected to strengthen from 6.6 per cent in FY18 to 7.4 per cent in FY19– with the economy clipping at 7.3-7.4 per cent in H1 and at 7.3-7.6 per cent in H2 with risks evenly balanced.

Do you know What is Cash Reserve Ratio (CRR), Finance Bill, Fiscal Policy in India, Expenditure Budget, Customs Duty? FE Knowledge Desk explains each of these and more in detail at Financial Express Explained. Also get Live BSE/NSE Stock Prices, latest NAV of Mutual Funds, Best equity funds, Top Gainers, Top Losers on Financial Express. Don’t forget to try our free Income Tax Calculator tool.

Next Stories
1Is ‘Make In India’ working? India to get leftovers as China rises to next level in manufacturing
2Good news for Modi: India Ratings upgrades GDP growth forecast to 7.4%, but here is warning too
3Have FRDI Bill rumours triggered cash crisis in Andhra Pradesh, Telangana? Here is the truth