About:

• The second quarter or Q2 refers to the months of July, August and September.
• India’s Gross Domestic Product (GDP) grew by 6.3 per cent in Q2 on a year-on-year basis.
• In other words, it was 6.3% more than the GDP in the same months in 2021.
• MoSPI also reported that India’s Gross Value Added (or GVA) in Q2 grew by. 5.6 per cent on a year-on-year basis.

GDP and GVA:

• GDP and GVA are the two main ways to ascertain the country’s economic performance.
• Both are measures of national income.
• The GDP measures the monetary measure of all “final” goods and services— those that are bought by the final user— produced in a country in a given period.
• The GDP does this by adding up the total expenditures in the economy; in other words, it looks at who spent how much.
• That is why GDP captures the total “demand” in the economy.

There are four key “engines of GDP growth”. These are:

• All the money Indians spent for their private consumption (that is, Private Final Consumption Expenditure or PFCE)
• All the money the government spent on its current consumption, such as salaries [Government Final Consumption Expenditure or GFCE]
• All the money spent towards investments to boost the productive capacity of the economy. This includes business firms investing in factories or the governments building roads and bridges [Gross Fixed Capital Expenditure]
• The net effect of exports (what foreigners spent on our goods) and imports (what Indians spent on foreign goods) [Net Exports or NX].

GVA:

• The GVA calculates the same national income from the supply side.
• It does so by adding up all the value added across different sectors.
• According to the RBI, the GVA of a sector is defined as the value of output minus the value of its intermediary inputs.
• This “value added” is shared among the primary factors of production, labour and capital.
• The GDP and GVA are related by the following equation:
  • GDP = (GVA) + (Taxes earned by the government) — (Subsidies provided by the government).