Net value added

Indian Economy glossary

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

Meaning

Net value added (NVA) is the value a producer adds after allowing for wear and tear of its capital. Wear and tear is called depreciation or consumption of fixed capital. It is a yearly allowance for machines and buildings getting used up. NVA = Gross value added (GVA) − Depreciation, where GVA = value of output − value of intermediate goods used. NVA shows the true new value created in a year, because part of GVA only replaces worn-out capital.

Example

A firm's output is worth ₹100. It uses intermediate goods worth ₹20, and depreciation is ₹10. GVA = 100 − 20 = ₹80. NVA = 80 − 10 = ₹70.

Don't confuse with

  • Gross value added (GVA): GVA still includes depreciation. NVA is always smaller than GVA by the amount of depreciation.

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