The recent farmer protests in some parts of the country throw fresh light on an old economic problem. People think in nominal rather than real terms. Price changes matter. The paradox of farmer protests when farm output is at record levels is less puzzling once we take falling food prices into account. It is the nominal rather than the real trend that is hurting farmers. The fact that it is lower prices that have brought farmers to the streets seems to have got widespread acceptance in recent weeks. This is a good cue to extend the discussion to some broader economic issues, especially about why the Indian economy does not “feel” like it is growing at 7%.The sharp fall in inflation in recent years has pulled down the growth in nominal gross domestic product (GDP). Many analytical muddles have followed.First, expectations continue to be set according to what people experienced during the years of high inflation after 2006. In other words, inflation expectations in India continue to be adaptive rather than rational. Second, several analysts have tripped because of the unfortunate habit of comparing nominal values with real values. So, ratios such as bank credit growth to real GDP growth or corporate sales growth to real GDP growth can give extremely wrong signals. Third, the tax base of the government is the nominal GDP. People pay taxes on what they actually earn rather than on their real earnings after inflation. The recent drop in Indian inflation provides an excellent opportunity to think more clearly on the old problem of nominal versus real variables in an economy.