Making Sense of Inflation: Be Secure With Insurance

Inflation is back, and how! Your monthly expenses are soaring, so are the prices of daily grocery items including vegetables such as onions and tomatoes, pulses and sugar, among other things. The Indian economy is more susceptible to inflationary pressures, particularly during the festive season. In its latest monthly release of the ‘State of Economy’ bulletin report for November 2023, the Reserve Bank of India (RBI) observed that while India’s inflation rate has declined, ‘we have miles to go’. 

Just as in the case of bite-sized insurance, a notable consumption trend is that smaller-sized packs tend to have higher consumption in rural areas. However, urban markets show a clear preference for average pack sizes.

Growing Consumer Preference for Super Premium Products

This festive season, there is a continued preference for larger packs, a research agency has recently highlighted. In November 2023, FE Online reported the growing consumer preference for super-premium products (usually double the average price) is noteworthy as the category grew at 17 per cent, which is not a small increase. The growth rate of products with mass popularity is witnessing almost the same growth rate. This further shows how both ends of the pyramid are witnessing demand while prices continue to soar. 

The current economic trends do not seem to indicate any potential strain on the economy for the rest of the year ahead. The time is now ripe to make insurance a top priority to tighten financial stability with a long term perspective.

Making Sense of Inflation in India

Inflation in India has always been a tricky terrain and is measured by various factors pertaining to consumption by Indian households. According to Deccan Herald’s latest report on current inflation trends in India, the repo rate has increased from 250 bps to 6.5% in just ten months. While there was a decline in inflation at the beginning of the year, it increased sharply from July-August. 

A simplistic way to understand inflation is to consider a relatable scenario. Suppose you bought some essential household items for about ₹1000 last month. However, the price of a single commodity in the list has increased by ₹1000, the fact of the matter is that you may be forced to buy the product at the price which would altogether tilt and impact your monthly household budget or you would need to remove the item. Simply put, high inflation offers a clear hint that the economy is facing difficulties. It is pertinent to note that low inflation is just as worrying for a different set of reasons.

At a time when inflation is under greater scrutiny by the RBI and there are global tumultuous developments constantly creating headlines, one striking reality emerges: everyone needs insurance! Amidst spiraling food prices, one cannot afford to fall sick and be hospitalised without a solid insurance plan that protects like a shield. 

Understanding Consumer Price Inflation and RBI Rate

The country’s consumer price inflation has eased to a four month low and is currently pegged at 4.87%. Wholesale prices have declined year-on-year for the seventh successive month. Notably, the overall uptick in food related expenses for Indian households stayed at 6.6%, which is almost the same as it had been in the previous month of September. The rise in food prices is likely to negate the gains made in the last two months. Given the rising food prices, the RBI decided to maintain the status quo on the current benchmark repo rate which is pegged at 6.50%.  

Households across the country are increasingly adjusting to the increasing living costs that continue to grow higher and they are holding back on discretionary spending. As experts often point out, rural consumers are price-sensitive and they are quick to switch over to more affordable alternatives. This trend has paved the way for the resurgence of smaller, local brands as well. 

The Indian economy derives its financial resilience from its domestic consumer demand buffer against unexpected or unforeseen global shocks. However, budget-tightening can present challenges as food price pressures pose risks to consumers in the segment. The RBI expects higher inflation in November and December. 

For most Indian households, safeguarding financial stability is most important. To secure a financially resilient future, opt for insurance solutions that are perfectly tailored to your lifestyle. Bid adieu to financial tensions by exploring the ‘Solutions’ segment on our website and book a demo with Zopper.