Short Rebuttal To Those Who Predict Doomsday For Economy Based On Lazy Analysis Of Data

by Karan Bhasin - Aug 27, 2019 03:06 PM +05:30 IST
Short Rebuttal To Those Who Predict Doomsday For Economy Based On Lazy Analysis Of DataThe Parle G story 
  • Parle G is not only the most popular biscuit of India. It is also a cover for lazy analyses and writing.

Frankly, I was alarmed when the report of difficulty on the selling of Rs 5 Parle-G packs came out. But I was not surprised because we had seen in the official gross domestic product (GDP) estimates that growth had indeed slowed down over the last couple of quarters.

The fact that there is a slowdown is no secret and, therefore, one would assume that at some point it would impact the fast-moving consumer goods (FMCG) sector.

However, it is very important to interpret data correctly before one draws any inferences. As a matter of fact, there’s a recent article that will help us understand how not to jump to conclusions.

More importantly, it’s a good lesson to understand that rigorous data analysis is usually dispassionate and free from ideological leanings.

I disagree with the premise that the difficulty in selling the Rs 5 biscuit pack reflects suppression of wages for many reasons.

First, the data point in consideration is for only one company and it ignores if, in general, the decline in its growth has come about due to its close substitutes or whether this is a general trend for the sector.

One must never use a single company’s data to draw conclusions about an entire sector.

Second, the data for the company in question represents merely a slowdown in the growth of sales and not a reduction in the absolute level of sales. There’s a big difference between the two. Sales for the company are growing, but they are not growing at the same pace as before.

The inconsistencies in the article are so alarming that one wonders from where to begin. For instance, it presumes that revenue targets are not being met because of changes in the taxation system.

However, in reality, the revenue shortfall is largely because of the growth slowdown from the second quarter of 2018-19.

This slowdown coincided with the sharp increase in India’s real interest rates but do not divulge this to the author because for most commentators the Monetary Policy Committee (MPC) is almost divine; and how can the divine bleed?

The other issue highlighted is with regards to industries like automakers and biscuits demanding lower goods and services tax (GST) rates. In general, firms always would want lower taxation rates, and nothing is surprising about this.

But somebody please ask the author to explain how did GST (or even demonetisation) impact the current slowdown in automobile sales?

The recent slump has more to do with the shift to BS-VI engines, non-banking financial company (NBFC) crisis and the revision of registration fees. Some of this has already been addressed by Finance Minister Nirmala Sitharaman in her latest press conference.

As far as wages, inequality and poverty are concerned, we have enough data that points out how India has had one of the most inclusive growth over the last few decades as it has uplifted millions out of poverty.

With many current poverty estimates suggesting poverty rate to be in single digits, there has been a definite robust growth at the bottom levels of consumption over the last five years.

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