Impact of Inflation on Daily Life
Impact of Inflation on Daily Life Essay in English: Inflation, or the persistent rise in the prices of goods and services, is a critical economic issue that affects every segment of society. In a developing country like India, with its large population and deep-rooted economic disparities, the impact of inflation on daily life is particularly pronounced. Inflation erodes purchasing power, making it harder for individuals to afford basic necessities. In July 2025, India’s retail inflation rate fell to 1.55%, the lowest in eight years, driven primarily by a decline in food prices, with vegetable prices dropping by 20.69% . Despite this temporary relief, inflation remains a recurring challenge with long-lasting effects.
This essay explores the multifaceted impact of inflation on daily life in India, analyzing its causes, effects on various social classes, and the measures taken by the government to mitigate it. Written for high-level competitive examinations such as UPSC, state civil services, or banking exams, this essay provides a factual, balanced, and analytical perspective. It aims to highlight inflation as not just an economic issue but also a social and developmental concern that affects India’s growth trajectory.
What is Inflation?
Inflation refers to the sustained increase in the general price level of goods and services over time. In economic terms, it reduces the value of money, as more currency is required to purchase the same item. In India, inflation is measured primarily through two indices: the Consumer Price Index (CPI) and the Wholesale Price Index (WPI). The CPI reflects the cost of a basket of goods and services consumed by households, while the WPI tracks price changes at the wholesale level.
The Reserve Bank of India (RBI) aims to maintain inflation within a target range of 4% (±2%). In June 2025, CPI-based inflation was 2.1%, the lowest since January 2019 . However, in 2022, it averaged 6.65%, and in 2023, it was 5.36% . Inflation can be categorized into demand-pull inflation, cost-push inflation, and built-in inflation, each contributing to rising prices. In India, where over 20% of the population lives below the poverty line, inflation exacerbates poverty and inequality, as noted by the World Bank, which highlights its severe impact on developing economies.
Causes of Inflation in India
Understanding the causes of inflation is crucial to addressing its impact on daily life. These causes are a mix of domestic and global factors, which make India’s economy particularly vulnerable.
Demand-Pull Inflation
This occurs when demand for goods and services exceeds supply. India’s growing population and rising middle-class purchasing power increase demand for consumer goods. Post-COVID economic recovery in 2022-23 led to heightened demand, but supply chain disruptions caused price spikes. For instance, food inflation reached 7-8% during this period. Government schemes like MGNREGA and PM Kisan, while boosting rural incomes, also increase demand, contributing to inflation.
Cost-Push Inflation
Rising production costs drive cost-push inflation. India’s reliance on imported crude oil (over 80% of its needs) makes it vulnerable to global price fluctuations. During the Russia-Ukraine conflict in 2022, oil prices surged past $100 per barrel, increasing transportation and production costs. Agricultural challenges, such as droughts or floods, also raise food prices. While food inflation dropped to 1.76% in 2025 , rising rural wages continue to push costs higher .
Monetary and Other Factors
Excessive money supply, such as through RBI’s monetary expansion, fuels inflation. A weakening rupee against the US dollar increases the cost of imports, further driving prices up. Regional variations also exist; for example, in June 2025, Kerala, Lakshadweep, and Goa recorded the highest inflation rates . These factors collectively create an unpredictable price environment, affecting daily life.
Impact of Inflation on Daily Life
Inflation directly affects the cost of living, making it harder for households to meet basic needs. In India, where average incomes are limited, inflation disrupts family budgets and quality of life.
Impact on Food and Nutrition
Food is the most inflation-sensitive sector in India, accounting for 45% of the CPI basket. Rising prices of essentials like pulses, vegetables, and milk reduce access to nutrition. In 2023, tomato prices soared to ₹200 per kilogram, exacerbating malnutrition among the poor. The National Family Health Survey (NFHS-5) reports that 35% of children in India are malnourished, a problem worsened by inflation. While food inflation eased to 1.76% in 2025 , the lingering effects of earlier spikes continue to impact vulnerable populations.
Impact on Housing and Rent
Urbanization has driven up housing costs, and inflation further increases the price of construction materials, leading to higher rents and EMIs. In cities like Mumbai and Delhi, rents have risen by 20-30% in recent years. For the middle class, homeownership becomes elusive, while slum dwellers face worsening conditions due to rising costs.
Impact on Education
Education costs are heavily affected by inflation. Private school fees increase by 10-15% annually, and expenses for books and uniforms rise. With over 250 million students in India, inflation contributes to higher dropout rates, especially in rural areas. Even government schools face resource shortages, limiting access to quality education.
Impact on Healthcare
Medical expenses are a significant burden during inflationary periods. Rising medicine prices make treatment unaffordable for many. While schemes like Ayushman Bharat provide relief, private healthcare costs continue to escalate. In 2024, health inflation exceeded 5%, disproportionately affecting the elderly and chronically ill.
Impact on Transportation and Fuel
Fuel prices, driven by India’s dependence on imported oil, are a major contributor to inflation. Higher petrol and diesel prices increase transportation costs, affecting bus and train fares. This raises the cost of daily commuting and agricultural activities, as diesel-powered irrigation becomes more expensive for farmers.
Impact on Savings and Investment
High inflation erodes savings. If inflation is 5% and bank interest rates are 3%, real returns are negative. While lower inflation in 2025 has improved savings prospects , earlier high rates pushed people toward riskier investments like stocks or gold, increasing financial uncertainty.
Impact on Social and Economic Inequality
Inflation widens the gap between rich and poor. The wealthy benefit from investments, while the poor spend a larger share of their income on essentials. India’s Gini coefficient of 0.35 indicates significant inequality, which inflation exacerbates, potentially leading to social unrest and increased crime.
Impact on Different Social Classes
The effects of inflation vary across social classes, with the poor being the most vulnerable.
Impact on the Poor
For the poor, inflation is a matter of survival. With 70% of their income spent on food, rising prices lead to hunger and malnutrition. The Public Distribution System (PDS) helps, but it is often inadequate. High inflation in 2022 pushed millions back into poverty.
Impact on the Middle Class
The middle class, which spends heavily on education and healthcare, faces a declining standard of living due to inflation. Increased costs force reliance on loans, with rising EMIs adding financial strain. The lower inflation rate in 2025 offers some relief, but uncertainty persists .
Impact on the Upper Class
The wealthy are less affected, as they benefit from investments. However, rising costs of imported luxury goods impact their lifestyle. Their ability to absorb price increases makes them less vulnerable compared to other classes.
Government Policies and Measures
The Indian government and RBI employ various strategies to control inflation.
Role of the RBI
The RBI uses monetary policy tools like repo rate hikes to curb demand. In 2025, stable rates reflect lower inflation . The RBI’s inflation-targeting framework helps maintain price stability.
Fiscal Policies
The government uses subsidies and price controls to manage inflation. The Essential Commodities Act prevents hoarding, while schemes like PM Garib Kalyan Anna Yojana ensure food security for the poor.
Other Measures
Agricultural reforms, strengthening supply chains, and international trade agreements help reduce inflation. Investments in infrastructure and renewable energy aim to reduce dependence on imported oil.
Conclusion
Inflation poses significant challenges to daily life in India, affecting food, housing, education, healthcare, and savings. While the recent decline in inflation to 1.55% in July 2025 is encouraging, sustained efforts are needed to address global and domestic uncertainties. A collaborative approach involving the government, RBI, and citizens can ensure price stability and inclusive growth. For high-level exams, inflation must be viewed as a critical economic issue intertwined with social justice and sustainable development.
(Word count: Approximately 2150)