Citing global best practices, the Reserve Bank of India (RBI) has decided to switch back to the gross domestic product (GDP)-based measure to offer its growth estimates from the gross value added (GVA) model. GVA gives a picture of the state of economic activity from the producers' side or supply side, while the GDP model gives the picture from the consumers' side or demand perspective. From January 2015, the government had started analysing growth estimates using GVA model and had also changed the base year to 2018 from January.
Deputy governor Viral Acharya has said that the switch to GDP is mainly to conform with international practice, for ease of comparison. He also said that globally, the economic health of a country is gauged in terms of GDP. He pointed out that this approach is also followed by multilateral institutions, international analysts and investors, and primarily they all stick to this norms because it facilitates easy cross-country comparisons.
Acharya further stated that even the Central Statistical Office (CSO) has started using GDP as the main measure of economic activities since January 15 this year. So, he noted that even though there are good economic reasons to employ GVA as the supply side measure of economic activity, they have decided to switch to GDP-based model.