Inflation and Economic Growth: What It Really Means for You
When we hear “India is the fastest-growing economy”, it sounds like good news. But for many middle-class Indians and small business owners, this growth hasn’t translated into better savings or spending power. Why? Because inflation eats up your income faster than you earn it.
Let’s break it down.
How Inflation Outpaces Income Growth
Focus Keyphrase: inflation and cost of living
Here’s a simple comparison:
| Item | 2010 Price (₹) | 2025 Price (₹) | Rise in % |
|---|---|---|---|
| 1 litre petrol | 50 | 105 | 110% |
| Monthly tuition (avg) | 800 | 4000 | 400% |
| 2BHK Rent in metro | 8,000 | 30,000 | 275% |
| Monthly groceries (4 pax) | 3,000 | 10,000 | 233% |
Are Indians Really Getting Richer?
- GDP is rising, but real income per capita isn’t keeping up.
- Taxpayers are now paying more indirect taxes (like GST) than ever.
- Salaried individuals face bracket creep — where inflation pushes them into higher tax slabs without real income growth.
Why Inflation Isn’t Always “Good”
“Inflation and cost of living are silent taxes. If not managed, they erode your real wealth faster than income tax ever can.”
How Inflation Influences Your Tax Planning
- No automatic inflation indexation for salaried income → you pay more tax.
- Only select capital gains get indexation benefit under Section 48.
- Budget 2025 proposes no relief on inflation-linked personal deductions
What You Can Do
- Re-evaluate your income tax regime (new vs old under Section 115BAC).
- Maximise inflation-protected instruments like PPF, SCSS, inflation bonds.
- Use Section 80C, 80D, 24(b) to full advantage.
- Plan long-term goals with real return, not nominal income.