Inflation: What it means to you as a student!

The inflation rate in India rose to 10.1% in September 2011. From 1969 until 2010, the middling inflation rate in India was 7.99 percent reaching an historical high of 34.68 percent in September of 1974 and a record low of -11.31 percent in May of 1976. It was also revealed that the key reason for the rise was that the costs of energy prices were going up in conjunction with transport and food. However, there isn't much need to panic as many connoisseurs have been cited as saying that the inflation rate may drop to around 2% by the end of 2013 or even 2012.

The given article discusses the meaning of inflation for students. We shall also enumerate certain trivial yet useful ways to beat inflation.

What exactly is inflation??

Inflation, in simple words, refers to the rise in the general level of prices of goods and services in an economy over a period of time. In other words, the value of money declines. Thus, inflation reflects erosion in the purchasing power of money. It is measured by comparing two sets of goods at two pints of time, and computing the increase in cost not reflected by an increase in quality.

The Impact of inflation is...

• The first immediate effect of inflation is that it hurts the standard of living. Rising prices means that one has to pay more for the same goods and services. Another crucial point is that if your income grows at a slower rate as inflation, the standard of living shall decline even though you may be making more. Thus its main consequence is the subtle reduction in the standard of living.
• You will now have to pay higher for maintaining the same quality of life since the savings will now buy less. As a result, you will have to save more to pay for the high-priced goods in future. Moreover, since the prices have already increased so you will be left with fewer amounts to save.
• If a student is seeking a part time job whilst carrying on studies, then he might encounter employers offering higher wages. However, this might not be the case always. Various business owners in the private sector have affirmed that they won't be trying to match inflation, though they would try to bridge the gap between the pay rise and the inflation rate.
• Unfortunately, the maintenance loan does not chase inflation at its present rate though it may increase the following year. The student debt for both tuition fees and maintenance follows inflation but in accordance with its base of interest. Inflation also influences the student's loan. The situation deteriorates further when the employers refuse to increase wages at the pace of inflation. This aggravates the graduates further.

Ways to beat inflation.....

• Inflation is a very wide economic concept. It has far reaching consequences. Students can fight inflation in the following trivial yet useful ways:
• They can cut down their spending on certain non-essential items. This may not seem ideal but it might help.
• Another thing is that if one is fond of having something too much and on a regular basis, then he should buy it in bulk before the prices soar. This shall prove to be useful in difficult times.
• Investing in commodities like gold etc might also prove to be useful. The prices of such goods always keep rising. But, one must be cautious as it is risky.
• Savings are always good. Though the savings rate may be lower than the inflation, but investing money in a savings account will reduce the loss. The risk is least and it also offers a safe return.
• Look out for students discounts. There are sites which provide the information on this. This might help in saving money on the must purchases.

Source: Latika Leekha (Shiksha Team)