The middle-class hell of living within a budget

CHENNAI: The demand and supply in the market seem to be bearish and the common man will soon be restricted to buying only the essentials. The inflation market is here to haunt the middle class, thanks to the rising cost of food items and groceries, both inching to an all-time high.

“Receipts of grocery items continue to remain higher for the past 3 months in Chennai city. The recent inflation has started burning the monthly budget of the common person, where the monthly expense of groceries had scaled up to Rs 8,000/ month. Similarly, 25% of earnings are spent on fuel, gas and cooking oil,” says B Anand, a financial advisor with a private firm.

Economists have been warning about the current economy and the situation of those with loans and credit cards will be adverse if they don’t develop financial discipline. With the banks increasing the lending rates and inflation burning the pockets, there’s no reserve money available in the market and the mutual fund promoters are feeling the heat, opines Anand.

“Earlier, we used to spend Rs 3,000 every month for grocery items, but now with a sudden spike in essential commodity rates we purchase for Rs 8,000-10,000/ month,” says homemaker S Sadhi.

Apart from groceries, even LPG cylinders, vegetable prices surge abnormally, where we spend more money on it. Almost half the income is spent on these items alone, and for other expenses such as electricity bills, school fees, medicines, petrol we borrow money,” the homemaker explains. She adds that even the lenders have increased the interest rate adding to the default. We are struggling to manage the household and the earnings are not sufficient to manage a family due to price escalation.

“Three months ago, we witnessed price rise in cosmetic items due to demand. But now the increase in price has affected the sale of cosmetic items including soaps, shampoo, and face creams. The sale has dropped by 50%,” says R Punniappan, secretary, Koyambedu Food and Grains Wholesale Market. “People are not willing to spend on cosmetic items as they give priority to the essentials and grocery items. The re-opening of schools and the increased cost of stationery products had also affected our business.”

There’s more to drain the pockets say analysts following the Indian economy and inflation.

Commenting on how inflation impacts society, Va Nagappan, an economic observer says, “Without enough money, people are forced to borrow from others, when they return the interest rate doubles. Inflation leads to an increase in interest rates and then to EMIs too. We’ve enough supply, but demand is not picking up much in some areas, which affects the economy.”

At least 50-60% for essential items, and 25-30% for other expenses such as cable TV, and OTT platforms, have also become essential. “The percentage of people who are eating outside has also increased to 10-20%. When inflation surges, the middle and upper-middle-income groups will cut down the non-essential things they’ve been spending on. And this will reduce the market demand,” explains Nagappan.

On the other hand, the lower middle-class people will not be affected much because most of their expenses such as school education fees, and travel expenses will be covered by the State government.

The inflation of fuel and food prices is very high, and if it continues, the public will be affected more.

“Surge in inflation affects people in the middle-income group because their consumption will go down. Most of the income is allocated for essential items, so when inflation is high, they’re forced to reduce the number of products they consume,” says K Jothi Sivagnanam, a Chennai-based professor in economics.

According to reports, even malnutrition has increased in recent days due to an increase in inflation. “As this situation is uncertain and unstable, investors are also impacted due to the same reason. The interest rate will surge so they won’t be able to invest much, and whatever they have borrowed that value will also increase,” he adds.

Another pressure is that the Indian rupee value will go down, which will affect the import in our country affecting the business chain. “In India, we import more than we export; so the value of the Indian rupee is crucial for the business ecosystem to survive,” points out Sivagnanam.

The importers must pay heavy value. For instance, the country imports almost 85% of its oil. “In such cases, the government should pay an extra price. When the exchange price changes, the government should pay more than usual,” adds the professor.

Though the oil demand is still on the rise, prices have decreased marginally. Sunflower oil was sold for Rs 2,930 (15 kg), palm oil Rs 1,420 (10 kg). The highest sunflower oil price was sold in May was Rs 3,255 (15 kg)

— Chandrasekaran, secretary, TN Oil & Seeds Association