GVA growth more accurate than GDP numbers for FY21: DEA

New Delhi, March 5 : The Department of Economic Affairs (DEA) of the Finance Ministry has said that following the growth of Gross Value Added (GVA) for FY21 would be more appropriate rather than tracking the GDP growth (contraction) which has been “distorted” for the current financial year.
The Monthly Economic Review for February released by the DEA noted that the food and fertiliser subsidy from the budget estimate (BE) to the revised estimate (RE) of 2020-21 increased by Rs 3.7 lakh crore. After making adjustments for pre-payment of loans of Rs 2 lakh crore taken for paying subsidy of previous years, the balance Rs 1.7 lakh crore emerged as the additional subsidy paid in the pandemic year.
This enhancement of gap between BE and RE caused the growth of subsidies to be significantly higher than the growth of indirect taxes, it said.
Consequently, the report noted that GVA growth became higher or in other words GVA contraction became smaller than that of the GDP.
In FY 2021-22, the annual growth of subsidy estimated over the unusually large base of the previous year will again become lower than the growth of indirect taxes.
“Real GDP growth will then exceed real GVA growth in FY 2021-22. Since GDP growth (or contraction) has been distorted in FY 2020-21 on account of significant growth of subsidies, GVA growth is a more appropriate measure to follow in the current year,” the report said.