GVA at factor cost

Indian Economy glossary

Topic: National Income Accounting: GDP, GVA and Welfare · NCERT: Class 12, Ch 2 "National Income Accounting"

Meaning

GVA at factor cost is gross value added counted only as payments to factors of production (wages, rent, interest, profit plus depreciation), with no taxes included. GVA at factor cost = GVA at basic prices − net production taxes Production taxes, such as land revenue and stamp and registration fees, are paid for carrying out production. They do not depend on how much is produced. The valuation chain is:

  • GVA at factor cost + net production taxes = GVA at basic prices
  • GVA at basic prices + net product taxes = GDP at market prices

Example

Suppose a firm's GVA at basic prices is ₹100 and it pays ₹5 in stamp and registration fees, with no production subsidy. Its GVA at factor cost is ₹95.

Don't confuse with

  • GVA at basic prices: this includes net production taxes but not net product taxes such as GST. Since the 2015 revision, India reports sector-wise output as GVA at basic prices.

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