Why is consumption dropping if economy is growing?

"Stage set for RBI rate cut as retail inflation falls to 2.19%," is a bold headline today. Consumer price inflation (CPI) is at an 18-month low, falling from 2.33% in November. Wholesale price inflation (WPI) has fallen from 4.64% in November to 3.58% in December, lowest for 8 months. The price of India's basket of crude oil has declined from $65 per barrel to $57.8 per barrel, while the rupee has strengthened from 71.79 to 70.72 to the dollar. Excellent news, but worry for the government. Because food prices continue to decline, although at a slower rate. Food prices declined 0.07% in December, as against 3.31% in November, while vegetable prices fell by 17.55% in December, compared to 26.98% in November. With agriculture providing employment to 45% of workers, it provided just 15.2% of GDP in 2016-17, wrote Prof A Panagariya. Not surprising then, that 76% of 5,000 farm households across 18 states said that they wanted to quit farming in favor of other jobs. With general elections in May a sharp decline in income for half the population is very bad news for the ruling party. The Reserve Bank could reduce interest rate a little, said Prof K Basu. That is almost a certainty with the appointment of a retired IAS officer, with no knowledge of macroeconomics, as the Governor of the Reserve Bank. The problem is that core inflation, which ignores volatile food and fuel prices, is still around 5.5%, while healthcare inflation was at 9% and education inflation was 8.3%. "A fast-growing emerging economy like India can ill-afford such a low inflation rate. If high inflation acts as a threat to growth, ultra low inflation does the same," wrote A Iyer. With the repo rate at 6.5% low inflation means that the real interest rate is at 4.31%, while compared to yields of 6.83% on one year Treasury bills it stands at 4.64%. So scope for cutting interest rate. But will it help? Purchasing Managers' Index for manufacturing fell to 53.2 in December from 54 in November. New investments fell to a 14-year low in the December quarter, with private sector investments falling by 64%, compared to the same quarter in 2017. Growth in services sector was slightly softer with increasing employment. So, if the economy is growing at over 7% why are prices falling? Is it because consumption is falling? If private expenditure is falling the government cannot take up the slack because the government has already spent 114.8% of the full year fiscal deficit and collections under the Goods and Services Tax are falling, which could be because of reduce private consumption. The government has to declare handouts in the interim budget so the only solution is to raid the RBI. Appointing a civil servant as governor of RBI might turn out to be a masterstroke. Loot and spend.