Rising Prices, Stagnant Incomes

Posted on July 2, 2011 in Business and Economy

By Misna Sameer:

Almost every nation in the world has been crippled by rising prices and stagnant incomes and in worse scenarios, a complete loss of incomes. Prices have been surging up to unprecedented levels. This was an imminent after-math of the global recession of 2007. Though every strata of the society were affected by this problem, the worst effected was the middle-class. As basic necessities became more expensive, people had to give up many of their indulgences to cope up with the current economic crisis. India is, in fact, one of the fortunate less-affected nations.

With food becoming pricier by the day, people worldwide are changing their diets and many are no longer having the same food they had two years ago. According to a recent survey conducted by an UK charity group Oxfam that covered over 16,400 people in 17 countries, including India, Brazil, Germany, Ghana, Pakistan, the UK and the USA, 54% of overall respondents and a majority of people in most countries surveyed said they are not eating the same food as they did two years ago, the period before the current food price crisis began.

Though India was not directly affected by the global recession, prices soared up to the sky. According to Prime Minister, Mr. Manmohan Singh, the situation that emerged in India was because of international commodity prices and since India is no longer a closed economy, the Indian society had to bear the brunt of the aftermath of the global recession.

Apart from the politically right reason behind inflation as suggested by the government, there are various other factors fuelling inflation in India. Rampant corruption in both the public and private sector is a major reason for price rise as well as widening gap between the rich and the middle class. The government has not acted against MNCs and some Indian traders indulging in overpricing and hoarding goods. In fact, lax in regulations by the government in the name of liberalization has led to business houses over pricing and looting the consumers.

Another reason is the large demand for imported western commodities and brand consciousness, making Indian metropolitan cities a haven for malls and hyper markets brimming with foreign good and luxury items. The property prices have escalated by 400-500% in the past few years. The rate of growth in India is at unprecedented rate which leads to price rise. If this growth can be slowed down, that will lead to a more stable economy for the consumers as well as business houses.

Rising prices is, in fact, an indication of economic growth. But this will lead to development of the nation only if the incomes rise at par with inflation. Most organizations help their employees cope with inflation. A cost-of-living allowance (COLA) adjusts salaries based on changes in a cost-of-living index. However, according to studies, increase in prices is manifold the increase in incomes, which has made life deplorable for the ever proliferating Indian middle class and poor.

Further, our Finance Minister, Mr. Chidambaram, once claimed that a bit of inflation was a small price to pay for growth. Really? Growth that leads to suffering- quite an amusing paradox! Do we really want this kind of economic growth at the cost of the common man? Isn’t it high time our government distinguishes between economic Growth and Development of a nation? The government has promised to do its best to curb growing inflation rates. However, it’s pretty evident that these tall words have not had much of an effect on the economic situation of the great Indian middle class.

It’s time raise our voice against this. Do we want to wait for an Anna Hazare to stand up for us? Let the youth of the nation take the wheel for a developed economy in which the common man’s welfare is the highest priority.