How to Effectively Manage High Inflationary Conditions with Low Salary Growth?

2 min read

The Indian Economy as well as the global economy is witnessing an unprecedented inflationary situation. India is consistently recording its Consumer Price Index (CPI) Inflation of over 6% which is above the ideal range which Reserve Bank of India expects it to be so. In this condition, the expenditure of the individuals tends to rise, but the growth in salary could be slow, so, what should an individual do during such time, let’s discuss this in detail in this article as we move ahead.

Impact of Inflation on Individuals:

  • The Inflation measurement tools Consumer Price Index (CPI) and Wholesale Price Index (WPI) Inflation are the common contents that are being shared in India concerning the inflationary situation and it is shared by the Government.
  • But, this data of inflation which is being shared by the Government might not be different from the Lifestyle inflation which occurs differently in every individual’s life.
  • Weightage of different items in CPI Inflation calculation:

Source: Ministry of Statistics and Programme Implementation Central Statistics Office

  • Here, one should compare his/her weightage of items with the weightage of items described in the list of the Government. If any of the items is increasing
  • As seen in the above table, except for the Housing, the inflation of all other items like Food & Beverage, Fuel & Lights, etc. has witnessed an increase in the pricing indicating a rising inflation situation.
  • To check the inflation impact in your particular case, then it could be checked as follows:
  • Raise Needed (%)= Inflation (%)- (Savings Rate (%)*Inflation(%))
  • If one needs to protect his/her finances against inflation one should have a higher savings rate and own income-producing assets that tend to rise with inflation.

What Should Individuals Do?

The impact of inflation on an individual depends on the savings capability of his/her out of his total income. If the expense percentage is higher then the impact of inflation for that person will be larger, and hence, one should carefully assess their inflation during such inflationary times to remain least or unaffected by such high inflation times.

Disclaimer: The information here is provided for reference purposes only and should not be misconstrued as investment advice. Under no circumstances does this information represent are commendation to buy or sell stocks or MF.

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