Value added is the difference the value of goods and cost of inputs used in producing them. In other words, the value created at different stages of production is called value added. It can be calculated by deducting intermediate consumption from its value of output. Symbolically,
Value added = Value of output – Intermediate consumption
The concept has great significance in national income accounting. Double counting is the main problem involved in the calculation of national income. In order to avoid this problem, value added method of measuring national income is used.
