Inflation is the decline of the purchasing power of a Rupee over time. It is measured by the rate of rising prices of goods & services in an economy. Inflation works as a hidden dragon that eats out our purchasing power and we hardly come to know it. It's like a slow poison.
In 1963 the cost of 1 letter petrol was just 72 paise/liter and today it is Rs. 90 / liter. If we see a CAGR of rising in fuel cost over 57 years which comes out to be @ 9% p.a.
In fact, every 10 years our purchasing power is reduced by 50%. Unless we take care to grow our investments, Inflation will make us much poorer in the long run. We can see from the below chart the value of the Rupee has eroded by 95% in the last 40 years. What that means is if we go to the market to purchase any goods/services for Rs. 1000/-,after 10 years we have to spend Rs. 2000/- for the same quantum of goods/services.
There is also lifestyle inflation which adversely impacts us more than CPI & WPI, will be discussing this in my next blog in detail.
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