Q.A wheat farmer sells wheat worth ₹4,000 to a flour mill. The flour mill grinds it into flour and sells the flour worth ₹6,500 to a bakery. The bakery bakes bread and sells it to final consumers for ₹9,000. Using the Value Added Method, calculate the Gross Value Added by each firm and the GDP contributed by this chain, and show why simply adding ₹4,000 + ₹6,500 + ₹9,000 would be wrong.

Only the extra value each firm adds over the inputs it bought counts toward GDP — adding up every stage's full sale value would count the same wheat three times. …

Stage 1 — Farmer: sells wheat for ₹4,000. The farmer buys no intermediate input from another firm in this chain, so:

Stage 2 — Flour mill: buys wheat (intermediate consumption) for ₹4,000, sells flour for ₹6,500:

Stage 3 — Bakery: buys flour (intermediate consumption) for ₹6,500, sells bread for ₹9,000:

Total contribution to GDP = sum of GVA at every stage:

$4,000 + 2,500 + 2,500 = ₹9,000$ …

Summing the sale value at every stage instead of value added at every stage (double/triple counting); forgetting that the value-added total must always equal the final consumer price …