Tomato To Fuel: India’s Middle Class Is Being Ravaged By Inflation

Tomato to fuel: India’s middle class is being ravaged by inflation

New Delhi, Nov 25, : Rising prices have adversely affected the financial health of Indian middle class families.These include essentials such as tomatoes, milk, and edible oils, as well as transport fuels.
This trend has not only affected the economically weaker sections of society, but it has also been cited as having an impact on the savings rate for the well-off.Inflation has the greatest impact on the purchasing power and purchasing power of those with fixed incomes.

 Tomato To Fuel: India’s Middle Class Is Being Ravaged By

They can now buy less than they did earlier.

However, although the macro level of inflationary pressure based on consumer prices has eased recently, it is still high enough that it can hamper any Indian family’s financial health.

Notably, the CPI-indexed inflation fell to 6 percent which is within the comfort zone of Reserve Bank of India.

However, some CPI items as well as wholesale inflation (WPI), have seen a dramatic increase like transport fuel prices.

A second-round effect means that any increase in fuel costs will cause a significant rise in the prices of almost all essential items.A rise in fuel prices can have a significant impact on overall freight costs and transportation costs.

Rahul Kumar, 28, commutes by his two-wheeler to Noida and says that the rise of petrol prices has eroded his monthly income, rather than helping him accumulate his savings.

He said, “The increase in petrol prices to over Rs 100 per litre, and tomatoes at Rs 80/kg, along with ever increasing rents, could not have come at an even worse time, since we are already experiencing pay cuts.”

“The high petrol prices and the high fuel costs have depleted my income.” Since at least the past two years, there has been no savings and investments.

Chabilal Das, a middle age daily essential supplier in Noida expressed similar concerns about the rising prices.

“My income has dropped drastically after the pandemic because very few people who work in the formal sector have returned to the city since they have work at home options.They are my target customer.Das stated, “How will I pay my EMIs now? That has now become my greatest headache.”

Anil Kumar, 40-year-old Delhi-based taxi driver, stated that rising fuel prices have affected his cost-to income margins.

“Rising fuel prices have been the worst for us as we have to pay EMIs on our vehicle loans.

This becomes more difficult due to a drop in real income.Kumar stated that the pandemic has been very hard on his family.

A rise in commodity prices worldwide inflated the cost of manufactured goods, which in turn hurt margins and end users.

Suman Chowdhury, Acuite Ratings and Research’s Chief Analyst, stated that “some categories in the food basket have experienced heightened inflation in this current year, which includes edible oil and meat, fish, and pulses.” With the opening of the economy, household spending has increased due to the sharply rising prices of petrol/diesel.

“However, it is important to mention that higher retail fuel prices have been offset to a certain extent because many salaried employees still have the freedom to work remotely.

As the economy continues to grow and the demand for contact intensive services like hospitality and leisure rises, there is a possibility that the inflation rate in services could increase.

Chowdhury estimates India’s headline inflation to be at 5.5% for the overall FY22 fiscal and 6.1% for Q4FY22.

Rajat Mohan, Senior Partner at AMRG and Associates, stated that the negative effects include a reduction in purchasing power and an increase in inequality in income distribution.This negatively impacts export income as export prices rises.

This leads to lower foreign demand, higher interest rates over the long-term, and a reduction in savings.

“The energy sector and food processing sector, as well as the goods and commodities sector, automobile industries and real estate sector, are constantly agitating with inflation, which leads to financial crisis and instability for middle-class families.”

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