RAS question
Gross Value Added (GVA) at basic prices is related to GDP as:
Correct answer: (C) GDP = GVA at basic prices + Product taxes - Product subsidies.
GDP at market prices is obtained by adding product taxes to GVA at basic prices and subtracting product subsidies.
Explanation
GVA at basic prices measures value added from production before product-level taxes and subsidies are converted into the market-price measure of GDP. The MOSPI formula states: GDP = sum of GVA at basic prices + product taxes less product subsidies. That is why the correct relationship is GDP = GVA at basic prices + product taxes - product subsidies. Since 2015, India has used GVA at basic prices as the primary production-side measure, while GDP at market prices remains the headline figure used for policy discussion. The adjustment converts a production-value measure into the final market-price aggregate.
Why the other options are wrong
- (A) NFIA is used to move from domestic to national aggregates such as GDP to GNP, so it does not convert GVA at basic prices into GDP.
- (B) Depreciation is already included in gross value added, so it is not added again to obtain GDP.
- (D) This reverses the required tax-subsidy adjustment: product taxes are added and product subsidies are subtracted.
Concept
National Income Accounting distinguishes basic prices from market prices. GDP, GVA, taxes and subsidies are standard tools for reading official growth estimates in RAS preparation.