Inflation can be referred as an invisible hand that removes incomes from the pockets of the poor and deposits them among the rich. At first glance, it might appear to us that inflation seems to hit everybody. This is misleading or even can be considered as half truth. We should apply our common sense to understand this situation. The profit or loss derived from general rising prices depends on whether the prices of things you sell are rising more than prices of things you buy. You must be aware of the fact that if the trader’s selling prices are rising faster than other produces, then his profit margins will certainly increase and not shrink. You can also apply this similar logic to Industrialists.
In the case of people who earn wages, will find their wages being raised in an inflationary period. However, wages are typically the last to go up as with regard to response to the increase cost of living. Thus, there appears a lag in which incomes are struggling to catch up with expenditure. In India, majority of India’s rural population consists of landless laborers or small and marginal farmers with tiny plots of land to cultivate. Most of them are net buyers of agricultural produce. Thus they don’t benefit with rising farm output prices. It is also noticed that the bulk of their selling is done at harvest time, when the prices of their produce are relatively low and they then buy the same thing later in the year when prices are higher. The poor are worst suffers of inflation. Also, they have little or no savings. They try to cope with higher prices by cutting back or essential consumption.
We must be aware of the fact that food forms a much larger part of their consumption basket compared to others who are relatively better off. The impact on them is even more bad when inflation is driven by food. I now conclude this article by saying that “inflation hits the poor, much worse than anyone else.
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