Impact of Inflation on Consumption Pattern of Households

Inflation is a common phenomenon in both developed and developing countries. In the past few years there has been quite a banter regarding inflation. While some argue that inflation is a sign of a healthy economy, others proclaim the negativity of inflation on the economy and its growth. It is evident that a rise in the rate of inflation gradually corrodes the purchasing power of people, especially those having lesser means. Inflation has a severe impact on households as the prices of necessities have surged beyond their purchasing power pushing them further below in their living standard. This plunges their indebtedness to a greater extent and they have to rely on borrowings to sustain themselves. The present study focuses on the inflation trend of essential goods and services in the country over a period of ten years and the impact of it on the consumption pattern of middle-income households.