… although perhaps the correct question is why is it down:
That’s the question that Amol Agrawal raises in his excellent column for Moneycontrol. This is actually the second part of a two part series, the first part is here.
Now, we live in a world where questioning government data is problematic for half of the Angry Online Horde, and not questioning it is likely to make the other half of the AOH angry. But if you take three deep breaths and remember that we’re all (this half and that one) students of economics, then this chart should make you pause and think:
This is not Amol (or me, or anyone else) hypothesizing about anything. This is fact (noun, meaning a thing that is known or proved to be true).
Now, given all of our political biases (and who doesn’t have ’em, myself included?), we can look at this data and say one of two things:
- Hah, see the gormint is lying!
- Hah, see we’re finally upping investment!
Have at it, and vent out your anger on Twitter. But once you’re done, regardless of whether you are Team Half Full or Team Half Empty, ask yourself what either hypothesis implies for the Indian economy.
Amol provides a way for you to start to think about the problem:
The difference between growth rates of GDP and consumption questions the growth rate of investments as well. Businesses look at growth rate in consumption data to make future investment plans. If growth rate in consumption is low, future investment growth is likely to be lower as well. Having said that, growth rate in investments in 2023-24 is expected to be 10 percent, higher than the 5.5 percent growth in 2022-23.
https://www.moneycontrol.com/news/opinion/the-macro-puzzle-ii-divergence-between-consumption-and-gdp-12493261.html
Macro can be quite an irritating so-and-so thataways. Regardless of whether you think the government is 0 or 1 on the Harishchandra scale, you need to think about the fact that lower consumption today will lead to lower investment tomorrow. And that is something we simply cannot afford.
Read whoever you like on this mystifying issue, misty eyed economists or otherwise. But begin by being clear about the theory that underpins macroeconomics, for you will surely not reach conclusions about economic data on the basis of political leanings. That’s what everybody else online does, not you!
Here’s a good book to help you begin your journey, if you’re interested in learning how to think about macroeconomic theory.
EconForEverybody 