The Silver Lining: Top 5 Reasons Why Cooling Inflation Is Good For Us

Consumer price inflation is a widely used phrase in the financial world. Economists, analysts and market strategists seldom use inflation metrics to provide their expert opinion about an economy, the worries and the progression but what it actually means to common man like you and me?

The economic meaning of inflation is rise in prices of goods and services and the cause of that rise should be demand in an ideal world but in the past few years after the pandemic, inflation has been supply driven. For e.g. assume there are 100 people in a village and there are 100 meals available. Now they are happy with the meal and want to double it which means 200 meals for the village. The provider notices that there is demand for this kind of meal so he increases the price due to higher demand. That is inflation fuelled by high demand.

What has happened since 2020 is supply of food, semi conductor chips, medicines and other necessary items has sharply fallen which has propelled supply based inflation or in other words higher consumer prices.

In both cases, inflation cooling off is a good news and it will give relief to common man in many different ways.

India's retail inflation rate touched a three-month low of 5.10% in January primarily led by food prices which rose more slowly but the Reserve Bank of India is expected to wait for some more time before cutting rates.

1. Inflation Down, Save And Invest

Once inflation cools-off, prices of goods and products fall too. For example, if price of 1 kg rice falls from Rs 60 to Rs 50, you save Rs 10. Now add that to multiple products and you will notice that you can save more as inflation dips.

Some best ways to use those savings is to invest wisely. There are many daily and weekly schemes as well as you can invest in the stock market if you are looking for higher returns. Although volatile, the stocks market can give huge returns if invested wisely. If you are a safe player, then you can invest in bonds, gold, mutual funds or post office schemes.

2. No Pain, No Gain

Energy prices have a massive implication on inflation. If there is some kind of unrest in the West Asia and oil producing nations it can shot up fuelling inflation. Extremely climate can also trigger high inflation. During winters we tend to use more heaters in cars and house.

Similarly in India, during summer we tend to use more air conditioner or coolers which indirectly pushes our energy use up.

3. Balanced Inflation Helps Employment

When inflation is balanced, even employers dont have to worry about hiring people at higher costs. Wage inflation is something that is very closely watched by most market players. Companies across the world face high attrition when inflation is high and wage growth is not in par with rising inflation.

For e.g. if Anil works at XYZ Corp and makes around Rs 50k per month, inflation shoots up 5% but his annual appraisal shows only 3% wage hike, then chances are Anil will switch companies for better perks. This is just an example. In reality, there could be many other variables which can impact attrition and wage growth.

4. Impact Of Inflation On Mental Health

Mental health is a bigger challenge that previously thought. It has been noticed that when consumer prices have touched record high, people have fallen sick and mental health has taken a toll on people's lives more. This, according to many health experts is a sentiment.

When inflation falls and we know we can pay less for a product that we used to, it is psychology that works and keeps us calm. Just the thought of getting similar benefits for lesser money can be soothing for many people.

5. More Travel, More Celebrations: Low Inflation

One of the most tangible benefits of low inflation is the increased disposable income available to the average Indian consumer. This directly translates into more lavish and frequent celebrations. Whether it's festive seasons, weddings, or other family events, consumers are now more inclined to splurge, thanks to the reduced financial strain. From booking more opulent venues to opting for extravagant decor, the ripple effect of low inflation is evident in the grandeur of celebrations across the country.

Another sector reaping the benefits of low inflation is the travel industry. With more disposable income and the cost of travel-related services remaining relatively stable, Indian families are increasingly indulging in both domestic and international travel.

This trend is not only limited to leisure travel but also extends to educational tours, which are becoming a popular choice among students and professionals alike. The surge in travel is a clear indicator of the positive impact of low inflation on the quality of life, as it allows individuals to explore new cultures and gain valuable experiences without the burden of high expenses.