RBI uses GDP model

RBI shifts to GDP model from GVA model to calculate growth numbers – Qbera Personal Loans

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The Reserve Bank of India switched back to the Gross Domestic Product (GDP) Method from the Gross Value Added (GVA) method to calculate growth numbers – this, keeping in mind the current global best practices in arriving at growth numbers.

The RBI had started evaluating economic growth using the Gross Value Added methodology from January 2015 onwards, a popular methodology that analyses growth numbers from the supply-side perspective. The Gross Domestic Product Methodology, the more popular means to calculate growth estimates, uses the consumer or demand-side angle.

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RBI Deputy Governor, Viral Acharya, mentioned that the shift in the method of growth calculation was mostly because of aligning the procedure to global standards. The Central Statistical Office also uses the GDP method to calculate growth estimates, and started doing so from January this year.

While such is the case, it does not necessarily mean that the GVA method is an inaccurate means to evaluate economic activity and arrive at growth numbers. It is purely a means to comply with practices that are more prevalent globally.

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