Inflation Explained: Why price rise and what it means for you

If you have ever felt like your money disappears faster than it used to, you’re not imagining it.

The Rs500 that once comfortably covered groceries now barely lasts a couple of days. Eating out feels more expensive, fuel prices hurt a little more each time, and even small daily expenses seem to add up quickly.

This feeling that life is getting costlier is not just psychological. It has a name in economics: inflation.

In simple terms inflation refers to the sustained rise in the general price level of goods and services over time which reduces the purchasing power of money. As inflation increases each rupee buys fewer goods and services than before.
But inflation is not just a definition in the textbook it is something you experience every single day.

The McAloo Tikki Reality Check
Let’s take something simple and relatable.
A McAloo tikki burger.
Around 2010 it costs roughly Rs20-25. By 2020 the price rose to around Rs30-35. Today it is often Rs 50 or more.
The burger didn’t suddenly become premium. The ingredients didn’t double in quality.
So why did the price increase so much?
Because the value of money decreased over time.
The same Rs20 that once bought your burger can no longer do so. You now need more money for the exact same product.

What’s really driving these rising prices?
To understand why everything feels expensive, you need to look at what’s happening behind the scenes in the economy.
At its core, inflation is about demand, supply and cost. Sometimes, people simply have more money to spend. This could be due to salary increases, easy access to loans or government spending. When more people are trying to buy the same goods and services, demand increases. If supply doesn’t keep up, prices rise. This is known as demand pull inflation.
A simple way to understand this is to imagine a concert with limited tickets. If too many people want those tickets, prices will naturally increase. Similarly, in the economy, when demand exceeds supply, prices go up.
On the other hand, prices can rise even when demand is not very strong.
This happens when the cost of producing goods increases. For example, if fuel prices rise, transportation becomes more expensive. If raw materials become costly or wages increases, businesses face higher production costs.
To maintain profits, they pass these costs onto consumers in the form of higher prices. This is known as cost push inflation.
In reality, both these forces often work together, which is why prices seem to keep rising across almost everything.

The difference is inflation.
And once you notice it, you start seeing it everywhere.
1) Petrol prices rising steadily
2) Rent increasing year after year
3) Higher school and college fees
4) Even subscriptions and entertainment getting costlier
Inflation is not a one time job. It is a slow, continuous process.

Why Inflation feels worse than what the news says
You might hear that inflation is around 5 to 6%, but your personal experience feels much worse.
That’s because inflation is measured using something called the Consumer Price Index (CPI) which tracks the average price of a basket of goods and services.
But here’s the problem, your life is not average.
If you live in a city like Mumbai, your rent may increase much faster than the average. If you spend more on fuel, rising petrol prices hit you harder. If you eat out frequently, food inflation affects you more.
So while the official inflation rate might be moderate, your personal inflation rate can feel significantly higher.
The Hidden Impact of Inflation on your Life
Inflation doesn’t just make things expensive, it quietly changes your financial reality.
The most immediate impact is on your purchasing power. If your income does not grow at the same pace as inflation, you can afford less overtime.
It also affects your savings.
If your money is sitting in a bank account earning 3 to 4% interest, but inflation is 6%, then in real terms your money is losing value every year. You may feel like you’re saving but your purchasing power is actually declining.
Over time this can have a serious impact on long term financial goals.

Is Inflation always a bad thing?
Interestingly, inflation is not always negative.
A moderate level of inflation is actually considered healthy for an economy. It encourages people to spend and invest rather than hold money. This supports business growth, job creation and overall economic expansion.
The real problem arises when inflation becomes too high or unpredictable.
In such situations:
1) People cut down spending
2) Businesses struggle to plan
3) Economic stability is affected
So the goal is not zero inflation, but controlled and stable inflation.

Inflation in Everyday Life
You don’t need economic data to understand inflation, just look around.
It is visible in your monthly grocery bill, the cost of petrol and transport rising, increasing education and healthcare expense.