As a kid I never realized buying groceries would be such a painful experience. I might sound funny but the way the rate of inflation in India is increasing, I might have to take a loan each time to replenish the larder!
Sometimes I wonder how the common man is managing when middle class families such as ours, with two earning members are pinching pennies. According to Gallup’s Financial Wellbeing Index, 31% of Indians rated their present and future lives as “suffering”! This is clearly evident when you talk to people around you.
Government’s inefficiencies combined with numerous high visibility cases of corruption have furthered the distrust in the minds of many companies. The uncertainty is causing them to either postpone projects or relocate them to other markets for better growth prospects. It’s a vicious cycle that results in lesser jobs and lower income growth.
The global rating agency Standard &Poor (S&P) recently scaled down India’s credit rating outlook from ‘stable’(BBB+) to ‘negative’(BBB-) with a warning of a further downgrade if there is no improvement in the fiscal situation and political climate. Though the situation seems bleak; according to Bimal Jalan, former RBI Governor, one should not panic. As stated by Finance Minister Pranab Mukherjee, due to strong fundamentals of the Indian economy, it will return back to its pre-global crisis growth rate. Until that happens there is no respite to the people in general who are struggling day in and day out, in an environment of low growth, weak business sentiment, declining capital inflows and exchange rates and stock market volatility.
Investopedia defines inflation as a sustained increase in the general price levels of goods as well as services. A rise in inflation mean, every rupee you own will buy a smaller percentage of goods or services. As an immediate solution, government starts printing more money in order to avoid the economy going into a recession. But this creates even more severe economic crisis and there is no actual wealth creation. Only consumption cannot run an economy. There has to be production, considerable amounts of savings and capital accumulation, for an economy to grow.
Given the current circumstances, what India need is to try and control its inflation to manageable-low-single digit figure. It needs to create a sense of security in the minds of consumers, investors as well as entrepreneurs, so that they feel “safe” and “secured”. Inflation is not a disease, a catastrophe or an act of God. In fact it is a tool in the hands of government to manipulate the economy – to adjust or readjust the market equilibrium. With some good policies and timely actions, it can be kept under check.
So I guess until the Indian economy is back under control and inflation is curbed, you and I will have to continue paying more for the stuff we buy every day!