Impact of Inflation on Business Decisions and the Indian Economy

This essay examines the impact of inflation on business decisions, focusing on the challenges faced by the Indian economy due to the COVID-19 pandemic. It highlights issues such as increased cost of living, unemployment, and rising prices of essential goods like edible oil, vegetables, and fuel. The essay analyzes how inflationary pressures lead to declining incomes and business losses, while also discussing the positive impacts of work-from-home arrangements. It further explores the role of the Reserve Bank of India (RBI) in managing inflation through repo rates and the impact of wholesale price index (WPI) fluctuations. The essay concludes by emphasizing the need for government intervention to balance the demand and supply of products, reduce excise duties on essential commodities, and support sustainable tax policies to alleviate the burden on consumers and promote economic stability. The analysis incorporates various expert opinions and economic theories, such as the Phillips Curve, to provide a comprehensive understanding of inflation's multifaceted effects.

UNDERSTANDING
BUSINESS DECISION

Table of Contents
INTRODUCTION ..........................................................................................................................3
MAIN BODY...................................................................................................................................3
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................8
APPENDIX......................................................................................................................................9

INTRODUCTION
In this current era corona virus affected related to economic consequences that are
beyond spreading disease and that is why whole economy has affected in terms of business crises
(Phillips, Prominski and Tian, 2022). Also, this pandemic cause second largest global recession
in the history and population placed at one place due to lock down. Moreover, inflationary
pressure may pinch the consumer pocket because the rate of production of the goods are
increasing and consumer demand and it increases the lacks of supply. The main cause of the
inflationary pressure cause the economy adjust with the result of supply and demand. Due to
inflationary there are many problem faces by the consumers in order to increase the rate of crude
oil and it impacts on the exercise duty that increases by the government which impact on
increases the rate of other consumers goods such ass edible oil etc.
MAIN BODY
According to the article it has been analysed that there are different types of problem
faces by the consumers due to inflation such as increasing the rate of the edible oil, fuel, grocery
and other commodities and this is the major problem that can be faced by all the Indian due to
pandemic. This inflationary pressure cause the pinched pocket by disruptions for anticipations of
ease for the coming years. Consumer understands that it was very typical to live with that type of
situation while inflation and coronavirus both impacted the person very deeply. Experts thoughts
that inflations is more danger than coronavirus and at this type of situations consumer needs to
be stayed stronger and longer and cooperate with the family (Alcidi, Postica and Pieter De
Groen, 2022). Consumer was not able to understand the situation whether they can survive wits
this or not. After this second wave of covid 19 arrived at the times of April to June at that time
economy was well but Omicron might be affected the company by unsettle everything in the
shorts term. On the other hand to looking back into 2021 it has been analysed that it was the
tough year for the consumer because at that time there are more than 45 % of people lost their
job due to shifting, declining income, business losses etc. That is why inflation rate is also
affected due to demand of product was increased but consumer do not have enough money to
spend on the unnecessary items, so they only buy those goods or service which are most essential
for them. The positives impact of covid-19 are there are some people who are doing work from
home this is the most important causes of savings the fuel and diesel also it has flexibility and
agility because people are improved the employee retention. On the other hand there are many

people who lost their job due to shift to new place or increased unemployment. Also, work from
I not suitable for everyone because everyone has different personality. There are so many
employees who feel isolated during pandemic if affect their income level (Kwass, 2022).
The increasing rate of the processed or manufactured commodities are affected in order
to highs input cost of the raw material so selling price directly increase in order to increase in
rate of pulses, cooking oil, fruits & vegetable etc. to push the wholesale price is totally based on
the inflation and in the month of November there I remain sticky wicket. Experts feel that the
rate of high inflation can be stayed very long and it go to tough for consumers. However,
economic growth of the product are affected due to heavy monsoon and many crops are
destroyed due to this so it can remain causes of the inflation the process to reach the produces to
the consumers is relatively long and this long process increasings the rate of the product. The
retail inflation account taken by RBI and the main component are related to repo rate that are
helps to projected CPI (consumer price index) which are based ease of inflation (Kamande,
2021). However, WPI (wholesale price index based on the inflation that are help to hit high
record with the percentage of 14.25 in the month of November also it is against 2.30 % in the
years 2020 by hardening of the prices of minerals and oil, crude petroleum, natural gas. Then it
was declining in the month of the October. The wholesale price index remained in the double
digits for more than 8 consecutive months.
The governor of RBI had concerned about the high inflation rates on the basis of high
fuel taxes, also they suggest to the government in order to take the actions regarding this just
because of inflation affected the person very badly. Hike in taxes are affect the enterprise which
are working on the basis of market research and field work need more fuel and increases in rates
impact on the productivity which are affect the economic scale (Cabrelli, 2022). Also,
government is also on the biggest pressure to give the fiscal support for trade and industry on the
basis of zero resources. The sharp rise in global rates are affected the rates of edible oil that are
remained high whole year. In order to contribute the society government has done great job
regarding reducing the rate of import duties related to refined edible oil and crude oil which are
multiple times in order to rise the prices this statement are passed by Suresh Nagpal the chairman
of central organization for oil industry. For the reasons of high input cost for the manufacturings
good that are passed to end user in order to include the logistic cost that is why the rate of most
of the commodities are need to pay more. Chief economist Indranil Pan at Yes bank realized that

the normalizations of the growth in the economic can be beneficial for the society as well as
consumer because the rate global food are relatively high which impacted directly the
populations of India by buffer stocks of grain. Also, as per the pan current inflation trend to
indicate some permanency. After some limit can be expected that supply chains claims for
improving the inflations rate and can bring the comfort. In the India this is still appears that cost
push inflation pull the demand (Sorgi, 2022). The core inflation rate is expected to remain sticky
in order to pass higher input cost of the output price. Also, the rate of fuel inflation cans be easy
because the costs of various products are eating into household with their disposable income.
The rate of diesel and petrol are one of the major transport fuel that are need to continued by
setting record and it hits over 100 rs and 110 rs during the year but government can not take the
action against increasings exercise duties.
Government decreases the tax rate but at the same time it increases the rate of diesel and
petrol by 5 or 10 rs respectively. The costs of borrowing are increases as increase the rates of
inflation and the cost of capital automatically tend for increasing but it impacted on the long-
term impact. The pressure also increases due to this on the consumers so it is important to
decreases the use of personal vehicle and their many people who are using bicycle after
pandemic. Due to pandemic people have lost their job and the increasing rate of crude oil are
affected the rate of petrol, diesel and edible oil (Toffler, 2022). That is why the increasings rate
of food are affected in order to development of India. Author suggested that it is necessary to
conservations of fuel by atmospheric warming. The cost living is increases that impact on the
economy that are growing fast. The positive aspects of inflation is to people are more depended
on the train and this is the cheapest way that can be use by anyone without any hustle. It has been
suggested that tax policy should support with the help of sustainability and promote other
services such as with the help of renewable services.
CONCLUSION
It has been concluded that inflation rate affect the economic in order to increases cost of
living because due to covid-19 there are many problems faced by the economy. Unemployment
faced by people in global world. Consumer are faced high cost of goods and services such goods
are edible oil, that is the most basic item of human being. This inflationary pressure affected in
order to decline the income and business losses. Also, rate of fruits and vegetable are increases
that affect the income levels of the human being. Further, as per the article it has been analysed

that the rate of petrol and diesel are increases due to these governments has increases the exercise
duty. Also, manufacturing cost of the product are increases due to this it is necessary to use on
the basis of domestic availability of the goods.

As per the article, the push and pull factors keep influencing the overall the inflation rate
of the country and that is why, it pinch consumer pocket less in 2022. It is because from 2020,
the country faces issue of inflation where the prices of many products in India keep increases and
that is why, middle class people are not able to buy the same. Moreover, it also lead to decline in
income, job as well as many small business losses. As per the sources, there is a decline trend
identified over global market, but government keep focusing upon the new plans to in order to
contribute towards the positive economy. Kwass (2022) also explained in their study that RBI
mainly concern with the high core inflation after pandemic and that is why, the prices of food
and fuel raises. Also, from mid 2020 the input cost pressure also transmitted to retail inflation
which further reduce the demand of consumer and reduce the chances of buying products. Thus,
it shows that inflation has an inverse relationship with the demand of customer because when the
price of products increases, people do not afford to buy such and this in turn decreases the
demand as well. Further, according to the theory of Phillips Curve: Inflation Unemployment
trade-off, it has been identified that there is a negative or inverse relationship between the money
wage, inflation and unemployment rate.
Similarly, it has been also identified that when the demand for a commodity is high over
supply and if the price will also rise then the chances of increasing a demand is also raise. Thus,
it has been also identified under the chosen article that core inflation reflect price changes and
this is also underlying a long term inflation. So, at the time of pandemic where most of the
business were shut down and due to strict lockdown, the prices of the essential products were not
so high but most of the business fire employees and this in turn contribute to increase
unemployment rate as well. In 2022, it has been identified that government hoping to reduce the
excise duty and VAT on petrol as well as on diesel that help to provide a good experience to
Indian people. Yates (2022) also supported that due to raise in the inflation rate, consumer have
to spend more to buy the product and that is why they start reducing their level of demand which
in turn somehow manage their normal expenses. Hence, it can be stated that due to higher
inflation the price of goods and services automatically increases and this is not good for the
middle class people, as they do not afford to buy such products (Toffler, 2022). Overall, it can be
stated that that inflation is faced by Indian people and that is why, most of them are facing issue
so government have to make steps that help to balance the demand and supply of products and
provide products as per the need as well.

REFERENCES
Books and journals
Alcidi, C., Postica, D. and Pieter De Groen, W., 2022. Analysis of Developments in EU Capital
Flows in the Global Context (2021): Rise and fall after the COVID-19 outbreak. CEPS
External Contribution February 2022.
Cabrelli, D., 2022. Employment Law: a Very Short Introduction. Oxford University Press.
Kamande, K., 2021. THE INTRODUCTION OF VALUE ADDED TAX ON PETROLEUM
PRODUCTS: A CRITIQUE. Available at SSRN 3834637.
Kwass, M., 2022. The Consumer Revolution, 1650–1800 (Vol. 63). Cambridge University Press.
Kwass, M., 2022. The Consumer Revolution, 1650–1800 (Vol. 63). Cambridge University Press.
Lincoln, B.J., Kong, L. and Walmsley, T.G., Process Integration and Electrification for Efficient
Milk Evaporation Systems. Available at SSRN 3995404.
Phillips, J.W., Prominski, A. and Tian, B., 2022. Recent advances in materials and applications
for bioelectronic and biorobotic systems. View, p.20200157.
Sorgi, K., 2022. Hitting It Out of the Park: How Major League Baseball Changed the Game by
Not Changing Anything at All.
Toffler, A., 2022. Powershift: Knowledge, wealth, and power at the edge of the 21st century.
Bantam.
Toffler, A., 2022. Powershift: Knowledge, wealth, and power at the edge of the 21st century.
Bantam.
Yates, J. A., 2022. Put the Money in My Purse!: A History of Female Bank Robbers. McFarland.
Online
Inflationary pressure may pinch consumer pocket less in 2022: Here’s why. 2021. [Online]. Available
through: < https://www.business-standard.com/article/economy-policy/inflationary-pressure-may-
pinch-consumer-pocket-less-in-2022-here-s-why-121122700481_1.html>.

APPENDIX
Figure 1:Inflationary pressure may pinch consumer pocket less in 2022: Here’s why. 2021