Inflation - The Silent Jeb Katra

This article talks about how global economies are going through hyper-inflation. In addition, how this can affect normal people on day to day basis and what we can do about it!

Hi all,

I hope you are doing good. We all live in an era where COVID related discussions have become an everyday thing. In 2020 we saw a significant decline in the global economy, and we have been trying to get back on track ever since. Interestingly, no one is talking about "Inflation". I am sure many of you must have heard this word. Here is the definition,

"In economics, inflation refers to a general progressive increase in prices of goods and services in an economy." In simple words, inflation is nothing but "Monghwari". Government measure it by something called the Consumer Price Index (CPI).

The supply chain ecosystem disrupts whenever a global event happens, like a pandemic or war. Situations like this result in the increase of raw material prices, which increases the cost of the goods. However, there are multiple other reasons for inflation, but this is one primary reason playing out right now.

Now you will say, Vrushank, inflation is not a new concept; what is unique about inflation this time anyway. So, it is the percentage at which inflation is increasing. Let me share some of the data.

Srilanka as a country is on the verge of bankruptcy. The country witnessed inflation of 11.2% in Dec 2021. On the other side, Pakistan is battling 12.3% inflation, their highest ever in 21 years. The food prices went up by 30% on December 21. Even the developed economies like the US is also going through 7% inflation.

On the other side, India is going through a 5.92% inflation rate, increasing every month. Considering the global scenario, we might soon witness more than 10% inflation. So 100 bucks in your bank account will go soon worth 90! Sounds scary but true.

So, how this scenario will impact us? Well, don't be surprised if you see a drastic increase in consumer goods, petrol and services. Companies like HUL, ITC and Nestle have increased their product prices by 15-18%. Some innovative companies are not increasing the costs but decreasing the quantity. You may not realise this, but your mom sure does. I read a fun quote somewhere,

"High inflation is when you take your money out in a shopping bag and bring home your purchases in your pocket."

Is there anything we can do about it?

It is very little we can do in this situation. The best way to combat the crisis is to spend wisely. You may like to cut down unnecessary expenses on luxury and entertainment. In short, plan your budget wisely.

On the positive side, a high inflation environment presents good investment opportunities in the bond and security market. You can do your due diligence and plan your investments.

Let me know if you have some exciting strategies to overcome the high inflation environment.