Inflation

What is Inflation? It is a monster which eats away your money. Technically speaking, it is a fall in the market value or purchasing power of money. The idea is pretty simple. I remember the time when my dad use to get a salary of Rs 250 when he started working almost 70 years ago. His family status is what we can call a lower middle class family. Now compare the salary with what a typical lower middle class family will be earning today, like Rs 10,000. So what was Rs 250 seventy years ago is now equivalent to Rs 10000 now, a 40 times increase !! This is inflation. So it is essentially a real-life value of money which keeps on reducing.

Another important term that one usually comes across is ‘purchasing power’. It refers to the amount of goods and services a given money can buy. So Rs 250 seventy years ago would be sufficient to run a small middle-class nuclear family, while the same Rs 250 at present is insufficient even for single person’s one week food. So purchasing power of money has gone down in these seventy years. Inflation is nothing but a fall in purchasing power of money.