It was the year 2006, and my friend started his day very early on Valentine’s day. The 12-year-old timid Marwadi boy woke up at 6 am in the morning to buy rose flowers from the vendor whose thari (very small shop) was right in front of his home. On his way to school, he had exactly 20 rose flowers in his bag, each beautifully wrapped in transparent plastic sheet tied with a pink ribbon. These costed him Rs. 10 each. At least, 20-25 teenagers waited for him at the door of class 8th ‘B’. Once he reached the door of his classroom, his flowers were sold in no time! Rs. 20 each! (He sold the last five for Rs. 25 each).
Cut to Valentine’s day 2023: My friend has a revelation when he bought the same rose flower from the same vendor at Rs. 50. (This time for his wife; dude is happily married, just FYI)
For the same goods and services, my friend needs to pay more than what he did back in 2006. (BTW, what price do you think my friend would resell the rose for if he buys one today?)
That is how inflation works!
Inflation is the term used to describe an increase in the overall price of goods and services. Inflation is generally measured by looking at changes in the Consumer Price Index (CPI), which measures price changes for a basket of consumer goods and services.
It measures how much more money you need in order to maintain the same standard of living. Inflation is responsible to stop you from buying that PS5 after you have paid your monthly rent and bills. Once you overshoot your budget by spending money on the junk that you eat all day, your savings disappear instantly. It makes it more difficult to buy the things you need and want.
Major factors causing inflation:
- An increase in the money supply (printing too many currency notes)
- The government spending more than it takes in through taxes.
- An increase in the prices of imported goods -A drop in productivity.
- An increase in the price of oil.
- A decrease in the supply of goods and services.
- An increase in the price of commodities (like oil, food and gas), which usually happens when there is a decrease in productivity.
Some statistics for understanding the impact of inflation:
As per a report by PTI, retail inflation declined to an 18-month low of 4.7 per cent in April. The retail inflation was 5.66 per cent in March 2023 and 7.79 per cent in the year-ago period. This means that in the month of March this year, you can buy the same amount of goods in lesser money in comparison to last year.
Declined inflation rate in the month of April is a good thing for customers who can buy groceries for lesser price.
It was for the second month in a row that Consumer Price Index (CPI) based inflation remained within the RBI’s comfort zone of below 6 per cent. The government has tasked the central bank to ensure retail inflation remains at 4 per cent with a margin of 2 per cent on either side.
(Let us know if you want us to explain global statistics too. We’ll make another explanatory multimedia story for you)
