What exactly is inflation? How do we define it? We all might have heard our parents saying “When we were child we used to buy this thing for ₹1 but now it costs ₹100 “. The above scene which we are talking about is the best example of Inflation. Inflation is nothing but the increase in price of each and everything in the market. In other words we can also define it like this-“Decrease in amount of things, a particular amount of money can buy”. Inflation has always been the part of history. It is not the new term. It is like the invisible thief of your savings. There are various kinds of inflations. What is the inflation rate of India as of 2022? Should we worry about inflation? What is Hyperinflation? What causes inflation? We will try to answer all the questions in this post
Understand what exactly is inflation
Inflation as I have said already is the increase in price of each and everything in the market. In other words we can also say that Inflation means decrease in value of money. For example if you had ₹1 in the 1950’s then it is equivalent to current date ₹840 approximately. It means at present you can buy few candies from ₹1 but back then you could buy one week grocery supply for your entire family. Here the value of ₹1 is decreased over the years. As of 2022 we all have seen increase in prices of households. It is because of food inflation. The price for constructing the house has also increased a lot, it is because of house inflation. The current India’s inflation rate is 6.50% which is slightly higher as compared to normal inflation rate of India which is 4%.
Inflation has always been the part of every country’s economy. Uncontrolled inflation leads to economical crisis. For example in 1800’s, Spain, Hyperinflation led to collapse of the kingdom. Currently Venezuela has the highest inflation rate in the world. Inflation makes everything expensive. living becomes very hard.
Types of Inflations
The main types of inflations are:-
- cost-push inflation.
- Demand pull inflation
Hyperinflation:- It is a very rapid or accelerating inflation. During Hyperinflation you may see that the price of each and everything increase by high rate every day. The purchasing power of the currency falls drastically thus increasing the cost of all goods and services at rapid rate. If milk costs ₹50 today then it will cost ₹ 60 next day and ₹70 the other day. Hyperinflation is the most dangerous kind of price rise. It occurs during or after a war. For example after the first world war in Germany the situation of Hyperinflation occurred.
Another reason for hyperinflation is government printing and circulating excessive amount of currency. Due to excessive amount of money in the money leads to decrease in buying power of that currency. Currently countries like Venezuela and Zimbabwe are facing hyperinflation. Prices of every goods is doubling every 26 days on an average. In case of Zimbabwe, they went to so far that they started printing one billion Zimbabwe currency note. one billion Zimbabwe currency note was equivalent to $1.
Deflation:- When the prices of goods and service goes down then we have deflation. Deflation may sound nice but actually deflation cause high rate of unemployment. Business may face huge loss which in turn collapses the economy of the country. Wages/salary will be cut down to cope up with deflation.
Cost-push inflation:- cost push inflation occurs when the wages of the workers and the price of raw material for making products increases. Due to cost push inflation there will be shortage for products in the market. The best example of cost push inflation is in the year 1973, petroleum exporting countries restricted the production of oil due to which the oil price all over the world increased up to 400%.
Demand pull inflation:- Demand pull inflation occurs when demand for certain goods increases a lot. If there are more buyer for a particular product then there is demand for that product. Increase in demand will increase the load on manufacturers. Due to this manufacturer increases his production to cope up with the demand so the price of product will increase rapidly.
What is inflation rate India in 2022
The current inflation rate in India is 6.7%. The inflation rate has slowed down a bit. It was very high in the month of April 2022. As of now the inflation rate is steady there isn’t any unusual jump or drop. According to experts, the inflation rate will peak sometime in 2022 and it will gradually drop to 5.5% by the year 2024.
What should you do during inflation?
There are few ways through which we can survive through inflation. If you do not take action during inflation then all your savings will decrease gradually. One of the best way is investing your money in few things:-
- Gold– One of the best way to save your money during inflation is buying gold. If you think of saving your money in bank then gold price always. The currency will lose its value but gold will never lose its value
- Hold real assets:-If you have a lot of savings then simply in real investment or buy house.
- Stock market:- Investing your savings in stock market not only saves your money but also it will give you return. It is one of the best way to make passive income during inflation
ALSO READ: learn the best ways to invest in gold