How India’s soaring inflation puts more burden on the common man's pockets

• India’s retail inflation soared to an eight-year high of 7.79% and the Whole Price Index rose to 15.08% in April.
• Inflation is when there’s a rise in the prices of essential goods and services such as food, clothing, housing, transport, etc.
• India’s common man will be among the worst sufferers of this inflation, as they are struggling to manage their daily expenses with limited purchasing power on a minimum wage.

The unprecedented rise in India’s inflation rate has put an added strain on the common man’s pockets.

Driven by rising food and fuel prices, retail inflation soared to an eight-year high of 7.79% and the Whole Price Index (WPI) rose to 15.08% in April. Additionally, India’s rural inflation in the food basket was 8.38%, higher than urban inflation at 7.09%.

High inflation also means the rupee is losing its power. In our previous newsletter, we discussed how the Indian currency’s decline impacts your food, education, healthcare and other expenses.

What is inflation and what does it mean for the common man?

Simply put, inflation is when there’s a rise in the prices of essential goods and services such as food, clothing, housing, transport, etc.

So, everything gets expensive.

In India, generally, two kinds of indices are used to measure inflation— Whole Price Index (WPI) and Consumer Price Index (CPI).

The situation is so alarming that India’s central bank, the Reserve Bank of India (RBI), has shifted its focus from pushing growth to mitigating the ripple effects caused by inflation. Over the past 3 months, retail inflation numbers have remained above the RBI’s upper tolerance limit of 6%. The last time inflation was below 4% was before the global pandemic in 2019.

Due to the soaring inflation, consumers are losing purchasing power, which is a measure of how many goods or services you can buy with a unit of currency, at a faster-than-usual rate.

If you could buy one liter of cow milk for ₹45 a few months ago and now you can only buy it for ₹50, the value of your money has reduced.

And India’s common consumers are among the worst sufferers of this inflation, as they are struggling to manage their daily expenses with limited purchasing power on a minimum wage.

Reason behind this price rise and its ripple effects

The high rate of inflation in April was primarily due to the rise in prices of mineral oils, basic metals, crude petroleum and natural gas, food articles, non-food articles, food products and chemicals and chemical products than last year.

While the country was still healing through the after-effects of covid-19, the war in Ukraine has significantly increased the common man’s woes.

The war has caused a disruption in the global supply chain and pushed the prices of crude oil and other commodities.

Higher fuel prices add to the transport costs, putting an extra burden on daily food commodities as well as essential non-edible products.

Due to the export ban by Indonesia, switching from a rather expensive Sunflower oil to palm oil would not make much of a difference, too.

This hike in fuel, oil and travel has resulted in Fast Moving Consumer Goods (FMCG) giants like Hindustan Unilever, Britannia, Nestle and Coke hiking their prices by 3-10% across their wide portfolio and have shrunk their products.

The second increase in the price of domestic cooking gas cylinders, also known as LPG cylinder, by Rs 50 in two months, will add an extra burden to your expenses. With the revised rates, a 14.2-kg non-subsidised cooking gas cylinder will now cost ₹ 999.50 in several cities.

Expensive healthcare will also make a dent in your monthly budget as the government allowed pharma companies to hike prices by 10% for essential medicines in April. This hike includes painkillers, antibiotics, cardiac medicines and 850 formulations in total.

The rising inflation will not only directly impact the daily expenses of a wage earner that are slowly recovering from COVID-19’s impact but it also threatens to put them under further stress due to the recent hike in interest rates.

After May 21, home loan EMIs will see a hike as RBI increased interest rates by 40 basis points this month.

100 basis points make one percent.

Low-interest rates are unlikely to come back as India’s own central government predicts that the country’s economy will take at least 12 years to overcome covid-19 losses. It said that the ongoing structural changes catalysed by the pandemic can potentially alter the growth trajectory in the medium-term.