Food, fuel, soaps and oils are some products that have become costlier in recent months. The reason? Inflation. The rising cost of living due to inflation in India has most folks understandably concerned about their personal finances. Recent data reveals that retail inflation in India rose from 5.72% in December 2022 to 6.52% in January 2023.
To cope with the rising prices and cost of living and to gain control of your finances, it is imperative to understand what inflation is and how it affects your budget.
In simple terms, inflation is the rise in the prices of goods and services over time. It increases the cost of living and decreases the average purchasing power of a person. Inflation is typically measured using the Consumer Price Index (CPI), which measures the average change in the prices of goods and services over a given time period.
Inflation directly affects your household budget because it causes an increase in the cost of living. Consequently, your monthly expenses will shoot up even if you do not increase the quantity of goods purchased or the range of services availed.
For instance, if you spent Rs. 5,000 on groceries on average earlier, you may have to set aside a large sum on account of inflation, say around Rs. 7,000, for the same set of expenses soon.
It means that when you prepare your monthly budget, you will see an overall increase in your outlays. You can manage this price rise in different ways:
If you have the flexibility to move homes, you can compare the cost of living between different cities and choose a location that is easier on your finances. Over the years, several studies have assessed and compared the cost of living in different cities in India and across the world.
One of the most recent reports of this kind is Mercer’s Cost of Living Survey, 2022, which compared the prices of over 200 goods and services in 227 cities across 5 continents. The following Indian cities are featured on the list in order of increasing the cost of living.
These are some of the most expensive places to live in — if you plan to settle in a metro city in India. However, once you retire, you can compare the cost of living between different cities and towns and choose a quieter and more affordable place.
Even as product prices and the cost of living, in general, continue to remain a concern, there is some good news. Retail inflation dropped to 5.72% — a 1-year low — in December 2022. Furthermore, retail inflation is expected to decline to 5% by March 2023.
Nevertheless, tracking your expenses regularly and having a foolproof budget is crucial to inflation-proof your money. You can use Fi’s AI-powered money management feature, Analyser, to monitor your spending and maximise your savings despite any rise in the cost of living.
The cost of living in India varies from one city to another. Typically, tier-1 cities like Mumbai, New Delhi, Bengaluru and Chennai are more expensive, while tier-2 and tier-3 cities are easier on your finances.
The cost of living includes different expenses such as the cost of food, clothing, shelter, utility facilities, healthcare, education and more.
Much like anywhere else, the monthly expenses in India include various costs like food, housing, healthcare, education, utility bills, etc.
