NEW DELHI—Finance Minister Nirmala Sitharaman’s claim in Lok Sabha last week that the Indian economy is not in trouble and that “green shoots” of recovery were visible is a “problem” and serious analysts should not use the expression, India’s former Chief Statistician Pronab Sen said in an interview with HuffPost India.
“Now, this is the problem. Any economic system will show volatility. This is the nature of economic systems. Things go up and down. 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.
“So you remember last time they were saying, “Oh! IIP is up, so we are good.” Well, IIP promptly went down the next month.”
Sen made the above comments a day after the Narendra Modi government released data pertaining to the Consumer Price Index (CPI) for January 2020 and Index of Industrial Production (IIP) for December 2019. While the CPI, or retail inflation, was the highest since May 2014 at 7.59%, the Index of Industrial production was at -0.3% for December 2019.
According to Sen, who was previously the principal economic adviser to the then planning commission, what these numbers essentially show is that, there is 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.”
In other words, poor supply of onions and garlic, as well as other crops, caused a spike in food prices which reflected in high consumer price index in January and poor demand for manufacturing goods, which led to a drop in their prices in December 2019. The poor demand, he further explained, is due to the ongoing economic slowdown.
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