Indian consumers have lost about $128.7 billion to inflation in the last three years, largely pushed by rising food and fuel prices, according to The Economic Times (via research firm Crisil). Rising costs have chipped away at the purchasing power of the rupee.The report pointed out that food inflation was at 11.6% during 2008-09 to 2010-11, compared with the 5.7% rate of non-food inflation. Meanwhile private consumption expenditure increased to 17% for the same period, against 14% in the previous three years.
Rising prices have been a boon to traders and the price trends of commodities in the Wholesale Price Index (India’s primary measure of inflation) favours the middle and higher income classes.
But India’s large low-income and poor population that spends the bulk of its income on food continues to take a huge hit. Rising costs have left large portions of the Indian population with shrinking disposable income, limiting its ability to spend on much else besides necessities.
Crisil’s chief economist D K Joshi told The Economic Times:
“The poor, with limited discretionary income to spend on consumer durables, do not benefit much from their lower prices. In contrast, rising prices of food items strain their discretionary spending.”
The report stated:
“Rise in prices of these items has a greater impact on consumers, as they are purchased frequently and also account for a large share of a household’s daily expenditure. Purchases of manufactured goods, especially durables, are not as frequent. Therefore, a decline in prices of these goods often goes unnoticed,”
The Reserve Bank of India (RBI), has raised interest rates 10 times since March 2010. So far the rate hikes have struggled to contain inflation.
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