Gross value added (GVA) is defined as the value of output less the value of intermediate consumption. It is used to measure the output or contribution of a particular sector. When such GVAs from all sectors (∑ GVA) are added together and adding taxes (product) and reducing subsidies (product), we can get the GDP (at market price). GVA thus shows the production contribution of a particular sector.
Technically,
GDP at Market Prices = ∑ GVA at basic prices + product taxes – product subsidies.
In this context, when GVA from all sectors are added together and necessary adjustment for taxes and subsidies are made, we will get the GDP for the economy.
Remember:
GVA is for a particular sector
∑GVA is for the economy
GDP is for the economy
When the value of taxes on products (less subsidies on products) is added to the gross value added, the sum of gross value added for all resident units gives the value of gross domestic product (GDP). Thus, Gross Domestic Product (GDP) of any nation represents the sum total of gross value added (GVA) in all the sectors of that economy during the said year after adjusting for taxes and subsidies.
