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    Question

    Since 2015, India has adopted Gross Value Added (GVA)

    at Basic Prices as the primary measure of economic activity by sector. What is the correct conceptual relationship between GDP at Market Prices and GVA at Basic Prices? 
    A GDP at Market Prices = GVA at Basic Prices + Product Taxes – Production Subsidies b) c) Correct Answer Incorrect Answer
    B GDP at Market Prices = GVA at Basic Prices + Production Taxes – Product Subsidies Correct Answer Incorrect Answer
    C GDP at Market Prices = GVA at Basic Prices + Depreciation Correct Answer Incorrect Answer
    D GDP at Market Prices = GVA at Basic Prices – Net Factor Income from Abroad (NFIA) Correct Answer Incorrect Answer
    E GDP at Market Prices = GVA at Factor Cost – Indirect Taxes Correct Answer Incorrect Answer

    Solution

    Gross Value Added (GVA) measures the value of goods and services produced in an area, industry, or sector, whereas Gross Domestic Product (GDP) represents the total market value of all final products and services produced within an economy. GDP at Market Prices is reached by adding Net Product Taxes to the GVA at Basic Prices. The relationship is:    GDP = GVA + Taxes on Products - Subsidies on Products.    Note - The Ministry of Statistics and Programme Implementation (MoSPI) distinguishes between Production taxes/subsidies (independent of volume, like land revenue) and Product taxes/subsidies (linked to volume, like GST/Excise). GVA at Basic Prices already includes Production Taxes (net of subsidies).

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