Macro/Finance Group, NIPFP

In this paper, we discuss some of the methodological issues involved in the computation of value addition in the manufacturing sector. We deal with (i) problems of blow-up of estimates (ii) choice of indicators in measuring GVA and (iii) a possible misclassification of companies in the MCA21 database that can distort the GVA estimates. A sample based blow-up exercise shows that Paid-Up Capital and GVA contribution of firms have no one-to-one correspondence and the method can lead to overestimation of value addition. We construct an alternate method of blow-up by using representative industry GVA growth rates to scale up previous GVA estimates to account for data of unavailable companies. We show that a potential misclassification of companies in the MCA21 can also lead to significant distortion in GVA estimates.