- Posted July 1, 2014 by
This iReport is part of an assignment:
How to tackle inflation?
When the Indian share markets were bracing up for a rally as Modi Government came into power, inflation played a spoil sport and dampened investor sentiment. Inflation for the month of May came in 6.01% compared to April’s figure of 5.2%. There are speculations in the mind of a common man that a hike in the railway fares will further increase inflation and will affect a common man’s life.
Apart from this fact there is very high chance that a weak monsoon will push up the food prices which will add to the wholesale price food inflation. For a little while investors also got wary of the fact that the prevailing Iraq crisis will push up the crude oil prices ultimately adding a push to the inflation. However, these sentiments were subdued when it was made clear that the Iraq crisis will not affect the nation’s economy as much as it is expected.
There are various ways through which the Indian Government can work out a plan to tame the inflation but a common middle class salaried man can also stem the inflation in its own way. Let’s have a look at different ways how a common man like you and me can counter inflation in day to day life.
1) Money Will Not Grow in Savings Account: On an average a savings account of a bank offers 4% as rate of interest. Assuming that you have deposited Rs 1 lac in the savings account, after 1 year the total amount you would have would be Rs 1, 04,000. However, if you include inflation at 6% per annum, the value of Rs 1, 04,000 will be below Rs 1, 00,000. The inflation will reduce your purchasing power. Hence, it is very important to park your savings in an inflation-linked mutual fund or invest in various instruments which can factor in the inflation and provide high returns.
2) Don’t Travel Alone, Use a Car Pool: Travelling costs play a major role in reducing savings. With the increase in petroleum products travelling costs have increased exponentially. On an average a common man spends anywhere around Rs 3500 to Rs 4000 a month on travelling. If the person travels in a car pool the expenses might halve and stay anywhere around Rs 2000 a month.
3) Buy in Bulk or During Sale: During inflation, one has to think twice while purchasing anything. So it is better to purchase food articles in bulk at whole sale prices. Wholesale prices tend to be lower than the retail or market prices thus help us beat inflation. Similarly, a person should plan their shopping schedule in such a way that he or she can make the most of the Sale offer in the malls or markets. Sale prices usually have heavy discounts which attracts shoppers during a season sale. This is one of the ways to overcome the effects of inflation.
4) Brand Consciousness: The big FMCG companies like ITC, Godrej etc decide the pricing on the products after they spend huge sums of money on packaging, brand endorsements etc. The burden of that expense actually falls on the end users who actually purchase that product. Apart from few necessary products many of them are easily available from local stores at a much cheaper price.
5) Invest in Share Market: Instead of parking savings in the banks, there are many avenues where the money can be parked. Apart from investing in mutual funds and debt instruments one can also invest in equities in share markets. One should be having a knack of taking risks in the market. The government changed in favor of the majority, triggered which can be known as one of biggest bull market in stock market history in India. Hence, investments can be made in the share market with a long term perspective.