Inflation & Standard of Living

 In 2010 - 1 Kg of White Polished Rice cost Rs. 190/- per 5 Kilogram Bag, today the same Brand White Rice costs Rs. 356/- per 5 Kilogram Bag

Thats an inflation of 8.74% Per Yr

In 2010 - Health Insurance Policy of Rs. 10 Lakhs cost Rs. 35,800/- for a 60 year old Man , today the same policy costs Rs. 68,500/-

Thats an inflation of 9.2% Per Yr

In 2010 - a Rs. 10 Lakh Term Deposit would yield Rs. 7,270/- per month in income after TDS. Today the same 10 Lakh Term Deposit yields only Rs. 4,702/- per month in income.

Thats a decrease of 4.33% per Yr

In 2010 - a 1500 Sq Ft (Gross Carpet Area) Flat in a Suburban Area cost Rs. 53.88 Lakhs on an Average (Electronics City Bangalore, Tambaram Chennai and Peelmed in Coimbatore - three of the most affordable housing in South India as per India Today in 2010) with an EMI of Rs. 56,900/- per month for Full Loan

In 2020 - the same 1350 Sq Ft (GCA) Flat in a Suburban Area cost Rs. 74.25 Lakhs on an Average with an EMI of Rs. 83,700/- per month for Full Loan in the three most afforable housing in South India (Different Locations from the above ones)

Thats 6.25% a Year inflation in Per SFT House Price and 6.07% a year inflation in Relative EMI Payable.

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Inflation should be lower and Standard of Living Higher but in India the opposite is true.

Inflation is rampant while Standard of Living is becoming lower and lower.

So assumption of 6% Inflation makes full sense for India. I always assume 8% inflation to be on the safe side.

  

- Kanthaswamy Balasubramaniam