Gobbledygook leads to flimflam, isn't that so?

Our Chief Economic Adviser thinks that India is facing deflation according to a metric, called Gross Value Added deflator. The CEA has been banging on for the Reserve Bank to reduce interest rate so this is another stone to cast at the RBI. Apparently, in the first quarter of this financial year only agriculture showed an inflation of 4.5% while industry and services showed a fall in prices and the GVA was 0.1%. The GVA data discounts taxes and subsidies so this is supposed to be a better gauge of which way prices are heading. However, prices of goods and services determine what quality of life we can afford with our limited salaries while the interest rate determines what we are paid for term deposits in banks and what interest we pay on loans. So this discussion is of intense interest to us and juggling around with different methods of judging economic figures seems like an attempt to fool us ordinary folks with economic jargon. It is like selling dubious insurance products to gullible folks for the benefit of the government. What does 'value added' mean. To us it means how much value is added to a raw product after manufacture. For example, what is the difference in price of an iron rod compared to the iron ore from which it was made or the price of a salad at a restaurant compared to the raw vegetables. The wholesale prices of commodities have been falling for 8 months. It fell by 4.05% in July but the consumer price index increased by 3.78% in the same month. Granted that the compositions of WPI and CPI are not the same, still it shows an added value of about 7%. GDP grew by 7% while GVA grew by 7.1% in the first quarter but if we leave out agriculture and government employees then it grew by 8.8%. That is a hell of a lot of value addition and definitely not in deflation territory. Using GDP deflator inflation is up at 1.7%. The IMF has warned of falling commodity prices due to the slowdown in the Chinese economy and advised emerging economies to devalue their currencies and institute reforms. Deflation is supposed to be bad because people postpone purchases in expectation of further fall in prices but India is not a developed economy. Here 95% of people spend only on essential goods and services so they are very price sensitive. If prices are to fall demand will certainly rise. Low interest rate helps only in buying real estate and cars so it mainly helps the well off but if prices of essential goods and services fall it will increase spending power, thus increasing demand. The real obstruction to growth are high taxes which reduce demand. Yesterday Mr Suzuki asked auto parts manufacturers to concentrate on their own business instead of building hotels. And therein lies the nub. There is huge black money in construction and that needs low interest rate to sell. Hence all the gobbledygook.