Rising Inflation hits the Indian Middle class

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Even as smuggler make hay thanks to our government, honest middle class citizens are being squeezed like lemons by the soaring inflation.

The wage hikes of 8-10% have not been enough to keep up with the increased prices of basic stuff like food and energy. The living standards of people have fallen drastically as inflation has meant lesser disposable income for the middle class. Shopping has been sharply curtailed as people lower their quality standards to make ends meet. They are not eating out and doing only value buys. Car sales in India have seen a sharp decline, which is amazing for a country which has an extremely low percentage of car ownership. Note buying a car and a home is last in the mind of citizens who are facing a hard time meeting the basic necessities such as food, clothes and school feeds.

The survey conducted by India’s leading industry association Assocham has revealed a tale of sharply decreased savings, people desperately looking to augment income which has fallen far behind the increase in costs and people resorting to lower quality goods. Discretionary spending has been cut down sharply and that can be seen in the huge vacancies in malls. Industries have also been affected leading to a vicious cycle of job losses, lower incomes, lower spending and lower revenues for job generators. Tata Motors has recently sharply cut down costs on travel and hosting, while other companies are cutting jobs. Real estate and construction are also taking a hit with housing inventory touching new highs. Realty prices have not come down much, despite the problems in absorption. Car prices on the other hand have seen sharp discounts as inventory piles up for dealers and sales slow down to a crawl.

The Indian stock markets(NYSEARCA:PIN) are touching new all time highs but that has little grounding in economic realities which are quite miserable. Graduates are not able to find jobs while even people with experience are facing massive job losses. Reminds you of the educated unemployment trend in the 1980s, when the Indian economy was a closed one. The only silver lining remains the hope of a new administration after the general elections in 2014. The hope is that no government can be worse than the current one which has put India in the current morass.

Soaring inflation, high fuel cost, rising cost of education and health insurance premiums have eroded the real incomes of middle-class Indian families, with household savings rates dropping by a staggering 40 per cent in the last three years, says an Assocham survey. The majority of the families in metropolitans are slashing spending, trying to save money and go for value buying while shopping. One in four said they are going to try to increase their income and for this would like to switching to a better-paid job, taking a second job or working overtime. Besides, 82 per cent of the respondents in metro cities said that they have been falling behind financially and their standard of living has been impacted by at least 25 per cent.

Source – IE


Contributed by Sneha Shah, Green World Investor

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