Art & Design / VIEW

NeBuzz 7/16/2015
Thokchom Sony, A Manipuri Artist, Gives An Edgy Twist To Traditional Attire. Check Out His Beautiful Illustrations

Art & Design / WATCH

NeBuzz 8/21/2015
The Art Picnic - A Two-Day Mass Art Making Gathering For Artists And Art Lovers In Dimapur And Kohima

Industry / READ

NeBuzz 6/24/2015
Here's Why It's Important For A Strong Working Middle-Class To The Development Of An Economy

Industry / READ

NeBuzz 9/5/2015
WINDS OF CHANGE: Welcoming the era of cloud computing and online streaming and what we should expect in the years to come.

Posted by: NeBuzz Uploaded: 14-Jul-15

Why is it that the price of your favourite beverage (or for a matter of fact, all the commodities you consume) doubled since your childhood?

When you turn on the television to watch news during March every year, why is there a dreaded anticipation for the budget?

Why is it that the same amount of your money (over a period of time) is getting you lesser and lesser value?

Although it is common knowledge that prices of products increase over a period of time, do we understand why, and more importantly how to counter the rise of the same? The answer to all the above inquisitions might not be as staggering as ‘Ripley’s Believe It Or Not,' but inflation certainly demands your attention. Pundits say that inflation is an inevitable function of a growing economy. Hence a necessary evil. It affects everyone. PERIOD.

It affects our standard of living as it paves way to the rise in price of goods and services in general. It affects financial planning and the level of education we give to our kids. The word INFLATION in its true essence is the rise in price of Goods & Services over a period of time. So, understanding inflation becomes imperative to one and all as it plays a very important role in our daily lives. 

There are many theories that have been created by economists to explain inflation, but for the purpose of this article, we shall examine the primary symptom of inflation i.e. increase in price of consumer goods and services because of increase in input costs. When costs of companies, wholesalers and retailers go up, they need to increase prices to maintain their profit margins. Increased costs can include things such as wages, taxes (all kinds of them), logistics or increased cost of imports. 

Rise in the price of a universally essential commodity like fuel, is a key signifier of inflation. Often referred to as ‘Black Gold’, fuel is an essential ingredient in any manufacturing process. It is also an important component of indirect processes (like logistics) in manufacturing and service industries. Add to that the political and diplomatic significance of fuel, it makes for a highly price sensitive product. A strife or unrest in the Middle Eastern countries, a region that is essential to the fuel reserves of the planet, invariably affects a large section of the planet. Fuel being one of the most exhaustible resources comes in limited supply and therefore the cost of production and logistics increases. There on, we all know what escalating effects it has on the labels of goods and services.


When asked about inflation in context to Nagaland, a marble trader responded by explaining the overheads created by the unconstitutional tax levied by the numerous political outfits and self-attested motor unions. In addition to the endemic (to Naga inhabited areas) taxes charged at the toll gates (official and not-so-official), the truck drivers carrying the goods all the way from Rajasthan charge a premium because of the harassment that they experience on entering areas like Nagaland and Manipur. 

In an economic region, which imports most of its consumer products and industrial equipment, the logistical bottlenecks and the harrowing lack of infrastructure is a big component of the added inflation. Irrespective of the degree of development in states like Sikkim, Meghalaya and Assam; or the degree of underdevelopment in states like Arunachal Pradesh, Manipur, Mizoram, Nagaland and Tripura; the bottlenecks affects the entire region. 

In Nagaland, unconstitutional tax is levied by the parallel governments right from the time that the goods enter the toll gates. Furthermore tax is charged at the godowns and establishments of businesses and eventually at the sales outlets. The town municipalities and the state government charge their own brand of tax in all the districts of the state. It should be duly noted that all these taxes have failed to equate to sustainable public expenditure, which is the fundamental reason for a public tax structure. 

In addition to the inflationary tendencies at the national level, the North-eastern states of India are also subject to a varied range of cost adding activities, which invariably and in most of the cases do not add any iota of value to the goods or the services. A trader in Assam informed us of the ‘compulsory’ nature of voluntary donations to various organizations and unions. All these expenses are borne by the trader but eventually, as always, the incidence or burden of the tax always falls on the consumer.

The region is also heavily reliant on public sector jobs (60-70 % of the total working population are from the government sector), which usually see an increment based on the recommendations of the Pay Commission. Since India received its independence in 1947, only six pay commissions have been implemented. The Seventh Pay Commission was announced under the previous government on the 25th September, 2013 and is likely to take effect only from January 1st, 2016. With an underdeveloped private sector and a banking sector reluctant to forward much financial aid, the scope for capital formation is diminished. 


Consumer Price Index (CPI) is a measure of the changes in the price level of a sample of representative items of consumer goods and services like food and beverages, housing, transport and communication, fuel and light, clothing and footwear, medical care and education. In 2013, The CPI replaced the Wholesale Price Index (WPI) as the primary measure of inflation in India. It is undeniably one of the most closely watched statistics in the world. In the recent timeline of 2012 to 2015, the CPI in India has averaged 8.51%, peaking at 11.26% in November 2013 and reaching a record low of 4.38% in November 2014 (figures by Ministry of Statistics and Programme Implementation, India)

Therefore it is safe to assume that, the average expenditure has been increasing at a rate of 8.51%.  In the absence of any survey to help understand the impact of inflation and additional inflation in the North-east, we can also assume that the inflation effect will exceed 8.51%. Which leads us to the all important question, ‘IS YOUR MONEY GROWING AT THE SAME RATE AS YOUR EXPENDITURE?’


If your money is lying in the savings account of your personal bank, which gives you anywhere between 4-6%, you are losing about 4.51%-2.51% every year.

How do you fight the effects of inflation at an individual and consumer level?

Warren Buffett, who many believe to be most successful investor in the history of stock market investments, believes in the Noah principle, which states that building an ark is more important than predicting the rain. Building a financial ark implies that you understand your goals and concerns; it implies an awareness of available options and that you make smart and educated financial decisions (as opposed to being led by your greed and speculative tendencies).
Investment in gold and into similar instruments has always given a steady growth of 8% per annum for the last 15 years. Apart from appealing to the one’s status and reputation, gold per se is an unproductive asset, but the demand for gold will never wear down until the international currency for trading between nations is carried out through the American dollar, which in turn, is valued by the amount of gold reserves it has. It makes for quite a speculation when gold is purchased by the buyer with a hope that someone else will pay for them in the future, someone like him who is fully aware of its unproductive value.

Investing in fixed deposits and national saving certificates give a rough fixed annual return of 8-9.5% depending upon the instruments or institutions/banks you choose to do business with. Although one must consider that the risk of a high inflation rate eating away the value of fixed return instrument. 

Mutual Funds are a popular investment option because they are low cost as compared to direct investment in the stock market; and because they offer professional fund management and diversification, they also offer better inflation- adjusted returns. But one must definitely be weary of brokers who make their clients re-invest in order to churn out their commission/brokerage.

Today, investing in the Indian Stock Market seems more suggestible, as the economy has grown leaps and bounds after the incumbent Finance Minister, Dr Manmohan Singh under the leadership of Rajiv Gandhi, opened up the Indian economy to liberalization early in the 90’s. That is one of the major contributors to our economy where we are seeing billions of dollars getting pumped into our economy in the form of FDI (Foreign Direct Investment) as India has become one of hottest global destinations for Investments. 

Therefore, one needs to invest in instruments which gives return over and above the rate of inflation so that the inflation is best kept away and your investment yields a good return on the investment you made of your choice.

A sound and good investment is like planting a tree. Once you have planted the tree, it needs a good environment to grow, constant watering from time to time, proper exposure to sunlight, keeping away from pests, insects etc, which results into a healthy tree and thereby yielding healthy fruits. 

If you like what you're reading, share the buzz!

Skip Navigation LinksHome : Tag : Read


Culture & Lifestyle / READ

NeBuzz 29-Jun-15

Music / WATCH

NeBuzz 01-Jun-15

Entertainment / WATCH

NeBuzz 10-Aug-15

Entertainment / WATCH

NeBuzz 19-Jun-15

Culture & Lifestyle / WATCH

NeBuzz 25-Apr-15

General Knowledge / READ

NeBuzz 03-Aug-15

Travel / VIEW

NeBuzz 25-Aug-15

Health / READ

NeBuzz 26-May-15

Industry / READ

NeBuzz 26-Mar-15

Entertainment / WATCH

NeBuzz 19-Jun-15

Music / LISTEN

NeBuzz 17-Mar-15

Culture & Lifestyle / READ

NeBuzz 10-Jun-15