The spike in inflation forced Indian households to shell out an additional Rs 5.8 lakh crore by way of consumption expenditure in the 2008-09 to 2010-11 period, according to credit rating agency Crisil.
In fact, the rise in inflation led to a surge in consumption expenditure to Rs 3.76 lakh crore in 2010-11, against Rs 1.62 lakh crore in 2009-10, and Rs 0.45 lakh crore in 2008-09, the agency said in its research report.
Inflation, as measured by changes in private consumption deflator (which encompasses changes in prices of both goods and services consumed by households, unlike the wholesale price index which does not include prices of any services), averaged at 8.1 per cent per year from 2008-09 to 2010-11 as against 4.9 per cent from 2005-06 to 2007-08
In its report, Crisil said inflation, as measured by changes in wholesale prices or consumer prices, does not have a uniform impact across income groups. Spending patterns vary across households, and hence, differences in price increases across goods and services lead to unequal levels of inflation for different households.
Higher inflation in food articles versus price decline or a moderate inflation in consumer goods favours the middle and upper middle class as compared to the low income group which spends higher share of its income on food, according to the report.
Given that poor households spend higher proportion of their income on food-related articles, Wholesale Price Index-based inflation understates inflation faced by poor households.