The statement is very time-sensitive. It could be true until the next estimate comes out, or some other sources come out with their own figures. But a similar claim was made by the Pew Research Centre, among others, in June of 2022. They were specifically referring to the consumer-price-index (CPI); or, how costly it becomes for consumers to buy stuff. They were specifically talking about the US, where (at the time) inflation stood at 8.6% - the highest since 1981. It later rose even higher up to 9.6%. Since then, it has been compressed to 5% as of last April.
Post-pandemic India’s inflation rate peaked at 7.79% in April of 2022. Nothing as bad as the 12+ % that was experienced in 2013. Comparatively to the rest of the world, India’s post-pandemic record of inflation can be viewed as “successful”, however roughly around 6% since 2021. It stands at 5.66% as of this April.
Mint in February of this year, referred to an IMF report that forecasted inflation rates to remain relatively high globally at 6.6%. Amongst the many victims, Zimbabwe is expected to have the highest rate at 204%, and Venezuela at 1955%. For our South Asian neighbours: Pakistan (19.9%), Sri Lanka (29.5%), and Bangladesh (9.1%).
Inflation rates are dynamic, central banks perpetually grapple with them. (Inflation is the Highest it has been in 39 Years). The factors for this particularly debilitating episode of inflationary pressure worldwide have widely been attributed to Covid and its aftermath. More specifically, when businesses around the world struggled to remain standing as the lockdowns and restrictions stacked up as decrees, when volumes of workers got laid off from companies looking to cut expenses and remain afloat, governments had to intervene in the economy.
They did that by slashing interest rates, making it easier for businesses to borrow, and some even transferred direct cash to the hands of their citizens. Quantitative easing. Fancy talk for central banks buying government bonds in order to print money. A tactic that was first used in the aftermath of the 2008 Great Recession, once again found use during the pandemic.
And it worked for a while.
But the economy, the political economy is a sensitive soul. Disequilibria are quick to appear. And it appeared in the form of high inflation. There was a lot of cheap money going around for the past two years. And that cheapened the value of money.
Now, inflation is just part and parcel of the political economy; economists believe a modest amount of inflation is healthy for economic growth. But the effects of inflation, and the effects of high inflation, in particular, disproportionately impact the middle and the lower classes. They are the ones who suffer from the price rise of food, fuel, commodities, utilities and all that.
This brings us to the more structural issue at hand. The one that goes beyond inflation. Inflation, which is just a metric to measure the rate of rising prices in an economy.
Fun fact: as per the site https://www.worlddata.info/asia/india/inflation-rates.php - 1000 INR back in 1960 was worth 82076.76 in 2023 money (inflation of 8107.7%). In fact, 1000 INR in 2020 is worth INR 1178.40 in 2023 money (17.8%). Now the exact rate may be different from a different source, it depends on how one calculates the inflation rate. But it just goes to show.
Inflation is immortal.
What is not is the growth in real wages. People’s income. They have not been keeping pace with inflation since the 1980s. It is a well-known fact. A fact universally known. Income growth is measured in nominal terms (the face value), and the real-terms (the actually value adjusted to inflation). Thomas Piketty’s Capital in the 21st Century (2014) extensively discusses the problem of rich industrialists and businessmen getting richer due to the rent of capital increasing, while ordinary workers’ wages have remained at best stagnant. Across the world.
Since the release of the book, capitalism has remained structurally the same. The same problems plague us still.
An Oxfam report claims that the pandemic widened disparities in India, with the top 1% now owning 40% of the country’s total wealth, and the bottom 50% owning only 3%. From the pandemic (say March 2020, for argument’s sake) till November 2022 the top 1 %’s wealth increased by 121%. For the rest, there has been little significant increase.
But inflation continues to cruise. As always.
The chief economist of Motilal Oswal Financial Service wrote a column discussing the lack of a high wage growth rate in India. The average household financial position of the country is said to be weaker than pre-Covid times. Even high-performing sectors like banking and IT have seen little growth in employee (real) wages for some time now.
It is now a controversial discourse, that Indian IT (real, I repeat REAL, therefore adjusted to goddamn inflation) wages have not risen in the last decade. IT that is supposed to be India’s unicorn sector. But this is the case across industries and countries. It is now a cliché to state that real wages haven’t grown in the US since the 1970s.
Inflation by itself, in silos, is not the problem. Inflation rates keep changing. But the fact, that the world suffered two major financial crises in the span of a decade (the 2008-09 financial crash and 2019-2020 Covid-indued recession), and that the cost of living steadily climbing the stairways for eternity – reaching a global high in 2022 – coupled with the fact that the average person’s wealth is NOT growing, is the reason the zeitgeist is so economically morose.