1. Finance Min Nirmala Sitharaman’s claim that the Indian economy is witnessing “green shoots” of recovery is a “problem" & #EconomicSlowdown is here to stay, India's former chief statistician Pronab Sen told me in this interview.Key points in this #Thread bit.ly/3bIlrjd
2. Last week, FM Sitharaman said Indian economy was "not in trouble" & there were "green shoots" of recovery citing good numbers from 7 economic indicators, including high FDI & #GST collections. Few days later, 2 key indicators showed poor numbers bit.ly/3bIlrjd
3. Consumer Price Index (CPI) in Jan '20 was @ 5 year high of 7.59% & Index of Industrial Production (IIP) in Dec '19 fell to -0.3%, taking sting out of FM Sitharaman's claim of "green shoots". Thus, here, Sen cautions against using such exaggerations: bit.ly/3bIlrjd
4. "If every time something goes up you say that’s a green shoot, then you have a problem. You actually have to look at the trend, not a one quarter or one month uptick,” he said, while speaking with me. See full interview at this link: bit.ly/3bIlrjd
5. And what do these latest numbers for IIP & CPI, quoted above, tell us about the Indian economy? there's a “supply side problem in agriculture which is pushing up prices and you have a demand side problem in manufacturing which is pushing down prices.” bit.ly/3bIlrjd
6. In other words, poor supply of onions & garlic spiked food prices which reflected in high CPI for January & poor demand for manufacturing goods led to a drop in their prices in December 2019. The poor demand, he also said, was due to #economicslowdown bit.ly/3bIlrjd
7. But despite these clear indicators, the former principal economic adviser to the planning commission said, there isn’t “enough agreement” about the “origins of the problem” i:e #EconomicSlowdown "and that is where the real issue lies" bit.ly/3bIlrjd
8. Why is this imp? Sen explained: "economics is not aspirin. It’s more like an antibiotic, you have to recognise the nature of the problem. Where does it originate and what can you do to address that?" bit.ly/3bIlrjd
9. Sen also said he is worried about another less considered fallout of high food inflation. "what happens with high food inflation is, by and large, demand for other goods and services goes down." bit.ly/3bIlrjd
10. He continued, "So if you already have a demand deficiency for all other products, this will make it worse. That seems to be the situation. That is more worrying than the food inflation in itself, or the headline inflation for that matter." bit.ly/3bIlrjd #economy
11. Another imp thing: the Consumer Price Index, Sen said, is "seriously outdated" "the reality is probably not as bad as what the CPI is showing simply because the CPI now is seriously outdated," he pointed out. bit.ly/3bIlrjd
12. "The CPI is based on 2011-12 consumption patterns. Now we are 10 years down the road. So the CPI desperately needs to be revised," Sen said. #EconomicSlowdown bit.ly/3bIlrjd
13. But, he said, the revision cannot be done before 2022. Why? "For doing that we need to have the household consumption expenditure survey, that is where you get the CPI weights from. We had one in 2017-18 but the government has junked that," he said. bit.ly/3bIlrjd
14. As @someshjha7 informed us in this superb expose, the household consumption survey that Dr Sen alludes to above revealed a fall in consumer spending in 4 decades. business-standard.com/article/econom…
15. This embarrassing discovery led the Modi govt to scrap the report altogether. One of the consequences, as Dr Sen told me here, is that we have a seriously outdated Consumer Price Index. (If you read till here from the beginning, thank you!) bit.ly/3bIlrjd #economy
