Ask the women who run their household, an industrialist who wants to apply for an industrial loan, a consumer who wants to buy durables or a house. They will all begin by saying that inflation has steadily creeped into their pockets and is eating away their budgets, their profits, etc.
A household lady says Rs.500 fetches one a small packet of vegetables (consisting of 2-3 vegetables) and another Rs.500 for fruits and another Rs.1,000 for the ration (including Wheat+pulses). A total of Rs.2,000 on food items , this is quite high compared roughly 23% to the amount spent on the food items in 2008…This indicates that inflation has affected our household in a huge manner..the rates of food inflation linger at 15% and more, theyeby increasing our expenditure on food..We are seeing that necessities are becoming expensive and are coming at par with luxuries…For example, a litre of petrol, a kg of onions and a litre of liquor (beer) costs the same around Rs.60-65/-.
A look at the consumer segment – buying houses and vehicles reveals that rising interest rates are expected to affect the buyers pocket. Housing loan rates have been witnessing a rise over the past two quarters, consumers who have taken a housing loan worth Rs.2,000,000 will witness a rise of Rs.350-400 per month in their EMI’s (Equated Monthly instalment). Similarly, when a consumer decides on buying an automobile the expected rate hike (25bps) will pinch him further…For example if he takes a loan of Rs.300,000 he will have to pay Rs.60 more every momth or Rs.800 annually. This will dissuade a number of buyers from purchasing a house or going in for new vehicles..
On the industrial front, esp manufacturing companies the bottom line has been affected due to rising interest rate costs, input costs, etc. Over a period of one year, the fuel prices have increased more than 12%y/y, cost of industrial machinery has increased 7%y/y and input costs have risen in the same range. This has affected the margins slightly with expectations of further rate increase to pressurise the profit margins.
Thus whether it is consumers or industries rising inflation continues to pinch their pockets…