Economy

Published: Mar 03, 2023
Updated: Mar 03, 2023

Navigating Through the Economic Turmoil: How Rising Inflation and Rate Hikes Affect the Common Populace of India

Rate hikes continue

The Indian economy has been grappling with rising inflation and the possibility of rate hikes. Inflation has been on the rise for the past few months, and the Reserve Bank of India (RBI) is expected to increase interest rates to curb inflation. While the rate hikes may be necessary to control inflation, they could have a significant impact on the common populace of India. This article aims to explore the effects of rising inflation and rate hikes on the common populace of India and the chances of a recession in 2023-24.

Impact of Rising Inflation:

The increase in inflation has a direct impact on the cost of living for the common populace. As the prices of goods and services increase, the purchasing power of individuals decreases, leading to a decrease in their standard of living. Rising inflation also affects the savings and investments of individuals, as the returns on investments may not keep up with the inflation rate. Moreover, inflation has a cascading effect on the economy, leading to an increase in the cost of borrowing and lending.

Impact of Rate Hikes:

The RBI may increase interest rates to control inflation, which could lead to a decrease in borrowing and spending by individuals and businesses. The cost of borrowing for businesses would increase, leading to a decrease in investments and hiring. This, in turn, could lead to a slowdown in economic growth, resulting in job losses and decreased wages for the common populace. Moreover, the increase in interest rates could lead to a decrease in the demand for goods and services, resulting in a decrease in production and revenue for businesses.

Chances of Recession:

The combination of rising inflation and rate hikes could potentially lead to a recession in 2023-24. A recession occurs when there is a significant decrease in economic activity, resulting in job losses and decreased wages. While it is difficult to predict the likelihood of a recession, the current economic conditions in India do suggest a possibility of a recession.

Cautious approach adopted by RBI & Central Government in tackling inflation challenges while avoiding recession

Rising inflation and rate hikes have a significant impact on the common populace of India. The increase in inflation affects the cost of living and savings of individuals, while the rate hikes could lead to a decrease in borrowing and spending, resulting in a slowdown in economic growth. It is crucial for the Indian government and the RBI to take measures to control inflation without adversely affecting the common populace of India.