Let us know about inflation. It is a general increase of goods prices and service over the time. On the other hand, if the currency purchasing power gets weak then a country tastes inflation. When the process of the goods over time increases but not the purchasing power of people. In a simple manner, when you buy Rice 1Kg for Rs.50, but within couple of months it increases to one hundred. But here the salary of the people does not increase but the rice price increases. Let us know in detail about inflation.
Problems through inflation:
Through inflation daily needs get increased and people have lower income. Which makes survival difficult. As per a survey 34% Indian households are suffering to manage their expenses. Which shows every three out of ten people are suffering with financial stress. It is a good sign for any country.
Chances of food shortage:
As I mentioned earlier, if the prices of necessary goods like rice price increases. Then people who would not be able to buy them search for alternatives. Due to high demand on the alternatives. There will be a shortage of food.
Shortage is created because the demand is high, and production is not able to meet it. We have seen example in covid. A sanitizer is Rs.20 but during covid it was Rs.40. An empty spray bottle was Rs.10 before during covid it was Rs.30.
There are types of inflations lets know about them.
Cost push inflation:
This occurs due to a rise in production costs. The best example is crude oil. Every industry around the world needs any type of crude oil to run. Such as petrol, diesel, etc. for transport and other stuff.
The rise in crude oil prices surges an increase in production cost.
Built-in inflation:
As the name itself says, it was built to several reasons. Let us take an example for a better understanding. If a bread factors workers have demanded wage hikes. Slowly the wage hikes show on bread prices. To sustain their profits every company needs to do so.
India under inflation:
From 1960 to 2023 India’s inflation lies on 7.37% on an average. We think inflation creates negative effects on a country. But having a little amount of inflation is good for growth of country. Mostly stable 3% inflation shows remarkable changes in countries. But ours is higher than required. This high inflation makes people afraid to buy necessary items.
Now present in India people are afraid to buy necessary items. These are not my words, Nestle India and Unilever limited sales says it. These companies sell essential goods mostly. As per their sales record they have seen an all-time low in for necessary items sales. This shows how much middle-class people are affected by inflation.
Reason for inflation:
covid is of main reason for the inflation. It may have occurred 5 years ago, but imports and exports are affected seriously. Supply and demand do not match their marks. We have seen a great surge in smartphone prices because of chip shortage.
Not only covid we have seen Russia and Ukraine war how affected all the people around the world. Russia is the highest crude oil supplier, because of war there were less crude oil. This cause raise in prices of all items. Because anything need to transported.
Taxes another reason:
The government has increased taxes to high rates. From the last 3decaes government taxes re increased by 30% in India. For a clear example, if you have earned 10,00,000 rupees. Income tax will be around one lakh. The remaining nine lakhs are also not yours. Because if you buy anything there will be GST which is around 20% on average.
This shows in ten lakhs downs to 7.2lakhs after taxes. All these are estimated it may increase.
Government and RBI need to produce a plan to reduce inflation. Let us hope for the best government does.
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