Growing Inflation in India and its impact on the middle class.
India is a developing country that has been battling inflation for the past few years since the pandemic broke out. India's economy is currently struggling to survive the post-pandemic impacts on its agriculture, energy, goods, and services. With a massive population of 1,405,945,268 (based on projections of the latest United Nations data), India needs a surplus quantity of Food, Energy, Water, and Fuel for smooth functioning and for fulfilling the citizen's livelihood requirements. There is a visible crisis in the demand and supply ratio. The Illegal migrants occupying the land and resources from neighboring countries are also adding to India's concerns and compromising internal security. There is a general feeling of unrest due to a lack of resources, especially in the Northern region of India, where there is a massive shortage of Water and Electricity. The citizens of NCR (National Capital Region) are dealing with power cuts daily, and many areas are facing a lack of water supply. India the second-largest populous country in the world is also exporting its food resources to various countries of the world, during the pandemic it exported medicines and other raw materials to various countries and as a result, its people have to face consequences including a shortage of oxygen and vaccines. The situation is stable now as far as vaccines and other medicines are concerned, however, water and electricity have always been an issue in India. Diesel, petrol, and LPG price have been a pain area recently as it’s been touching a new high causing major setbacks in consumers’ wallets.
India’s middle class has been a strong supporter of the ruling party in India and while they choose the BJP-led NDA for a consecutive second term to form the government at the Centre, they had huge expectations related to the booming economy, affordable food, electricity, water, housing, ease of living and doing businesses. In 2019 the Second term for the NDA began and in January 2020 the pandemic started showing its impact at the global level. Like any other country, India’s economy has also experienced a major setback, and still, after so many losses India survived and stood strong to face the future challenge head-on, however, the second wave was brutal and the impact was even more brutal for the common man. Many lost their loved ones during this phase, and we observed total mismanagement but it would be wrong to blame the govt or hospitals for this entirely knowing the fact that India has a massive population, and it’s not easy to manage that kind of tragic medical emergency for the population of this size. India did its best and still trying to cope with the daily needs of its people while also trying to balance its commitment to the world by supplying food resources. While speaking to people of the middle class, it was clear that most of them are not blaming govt for the growing inflation and still the ruling BJP-led NDA has strong support from the middle class. The Middle-class wants affordable housing, gas, petrol, water, electricity, and public transport but they don’t blame the govt for price hikes and most of them think that due to the pandemic and the war between Russia and Ukraine globally countries are facing price hikes on most of the goods and services.
Graphical representation courtesy TradingEconomics.com and MOSPI.
While many young Indians are politically aware of the events happening in the country, still there is a young generation with the likes of Himanshi Mundra, 21 who feels like Inflation is not directly impacting young lots like her. "I am still dependent on my parents and they are the ones who are in a position to comment over the impact of price rise", said Himanshi Mundra, the CA aspirant. She further added that she knows about inflation but as she is not the bread earner of the family, it never crossed her mind. While expressing her busy schedule, Deepali Chavan a housewife and a mother of a girl child who is studying in a primary school said, “I hardly get time for myself as my day starts with preparing breakfast, sending my child to school while helping her with getting dressed up, preparing her lunch box, doing daily household duties like washing clothes, cleaning utensils, taking care of other household commitments, sending her to tuition classes and dance classes, further helping her with homework and by the time its evening time I have to start preparing dinner to serve the family.” She lives in a metro city in a rented apartment and the cost of living in a metro is pretty high, she did not share the details of how much extra she has to pay this year as compared to last year on food, fuel, groceries, and other daily items to manage her household. People in India especially the middle class generally refuse to comment on asking what they expect from the govt.
On June 15th, 2022, Rupee hit an all-time low at 78.28 per dollar from a report published in Business Standard. Also on 2nd, May 2022 RBI held a meeting of the Monetary Policy Committee and in a press, release mentioned, “Heightened uncertainty surrounds the inflation trajectory, which is heavily contingent upon the evolving geopolitical situation. Global commodity price dynamics are driving the path of food inflation in India, including prices of inflation sensitive items that are impacted by global shortages due to output losses and export restrictions by key producing countries. International crude oil prices remain high but volatile, posing considerable upside risks to the inflation trajectory through both direct and indirect effects. Core inflation is likely to remain elevated in the coming months, reflecting high domestic pump prices and pressures from prices of essential medicines. Renewed lockdowns and supply chain disruptions due to resurgence of COVID-19 infections in major economies could sustain higher logistics costs for longer. All these factors impart significant upside risks to the inflation trajectory set out in the April statement of the MPC.”
Reserve Bank of India - Press Releases (rbi.org.in)
Ministry of Statistics & Programme Implementation on 12th, April 2022 in a press release shared All India Consumer Price Index (CPI) on Base 2012=100 and corresponding Consumer Food Price Index (CFPI) for Rural (R), Urban (U), and Combined (C) for March 2022 which covered all the Indian states and the inflation rate for its Urban, Rural and Combined Consumer Price Indices. https://pib.gov.in/PressReleasePage.aspx?PRID=1816066
As per the recent report published on 8th, June 2022 by The Hindu, Reserve Bank of India (RBI) Governor Shaktikanta Das said the government is "mindful" of the current inflation situation, and it is up to the Centre to take further supply-side measures to contain the price rise situation. Govt mindful of inflation situation, says RBI Governor Das - The Hindu
Finance Minister Nirmala Sitharaman tweeted in May about the measures that GOI is willing to take to tackle inflation. "Today, the world is passing through difficult times. Even as the world is recovering from Covid-19 pandemic, the Ukraine conflict has brought in supply chain problems and shortages of various goods. This is resulting in inflation & economic distress in a lot of countries," she said.
“Our government, since when @PMOIndia @narendramodi took office, is devoted to the welfare of the poor. We’ve taken a number of steps to help the poor and middle class. As a result, the average inflation during our tenure has remained lower than during previous governments.”, said the finance minister in a series of tweets. She further added, “Even during the pandemic, our government set a paradigm of welfare, especially with PM Garib Kalyan Anna Yojana. This is now acknowledged and appreciated the world over. #PMGKAY”
In a nutshell, the finance minister shared the following measures taken by the GOI.
· In addition to the fertilizer subsidy of ₹ 1.05 lakh crore in the budget, an additional amount of ₹ 1.10 lakh crore is being provided to further cushion our farmers.
· We are reducing the Central excise duty on Petrol by ₹ 8 per litre and on Diesel by ₹ 6 per litre. This will reduce the price of petrol by ₹ 9.5 per litre and of Diesel by ₹ 7 per liter. It will have revenue implication of around ₹ 1 lakh crore/year for the government.
· Also, this year, we will give a subsidy of ₹ 200 per gas cylinder (upto 12 cylinders) to over 9 crore beneficiaries of Pradhan Mantri Ujjwala Yojana. This will help our mothers and sisters. This will have a revenue implication of around ₹ 6100 crores a year.
· We are also reducing the customs duty on raw materials & intermediaries for plastic products where our import dependence is high. This will result in a reduction in the cost of final products.
· Similarly, we are calibrating customs duty on raw materials & intermediaries for iron & steel to reduce their prices. Import duty on some raw materials of steel will be reduced. Export duty on some steel products will be levied.
· Measures are being taken up to improve the availability of #Cement and through better logistics to reduce the cost of cement.
India is working on its economy and infrastructure to provide its citizens with necessary resources at an affordable price but the road to accomplishment consists of speed breakers and the current govt is fully aware of the challenges. The world needs India and India needs its people’s well-being and govt is trying its level best to improve the status quo.