Sep 12: Inflation refers to the rising prices of the services and goods in an economy. There can be plenty of reasons for the increase in price. For instance, an increase in the cost of raw materials, wages, and demand for different products and services can cause inflation. Across the globe, inflation news is making headlines.

Not only is inflation high in developed countries but also in developing countries too. The rising inflation has become a matter of concern for governments across the globe, and one might be curious what is the real cause behind the inflation occurring right now.

What Is The Cause Of Sudden Inflation?

The pandemic has slowed down, but its impact is now visible in the economy of most of the country. One of the reasons for the sudden inflation resulting in the price of food and fuel is the impact of the Covid pandemic. Other factors that are contributing to global inflation are extreme weather, breakdown of supply chains and labor shortages that are increasing the price of food items.

According to reports, the price of food in the current month is 32.9% higher than the previous year. Sadly, this inflation issue cannot be solved using short-term measures like conducting Dhankesari because it requires long-term planning and is affecting people from all segments of the economic scale.

Further, each year, the reserves are depleting, creating a real problem. In fact, it is one of the major rises why fuel prices across the globe saw a tremendous increase. Asia is struggling with coal shortage, Europe is struggling with natural gas shortage and countries from across the world are facing a shortage of petrol.

Flush Of Cash

The impact of the Covid-19 pandemic was such that to cushion the economic impact, many governments gave people stimulus in the form of Lottery Sambad and other measures. Therefore, the economy is flush with economy. Also, because of the lockdown and the restrictions, many businesses used the cash to purchase items that were available but scarcely available. The supply was short; the demand was high; therefore, the prices of both the products and services increased.

The Economy Is Reopening

After the pandemic, businesses and industries have begun to function correctly. The economy is reopening at a tremendous level. People who previously could not spend money because of the restrictions and lockdowns are now spending the money. This is an opportunity for many businesses to raise the price of their product and services without the fear of losing customers, and this is currently happening.

However, not all businesses and industries can enjoy liberty. Demand for commodities is rising, but many businesses are still struggling to rebuild the supply chain, which was damaged because of the pandemic. The end result is such that there is a shortage of important things like shipping containers, making transportation a problematic task. This, in turn, is raising the price of the commodities. Many companies are passing this extra cost to meet the customers’ transportation needs, hence, the increase in price.

Inflation Wipes Away The Purchasing Power

Inflation can harm society for many people. Firstly, it must be noted that many people still live below the poverty line, and this section of people who majorly belong to the developing country are at extreme risk. With inflation, the prices of commodities increase; most of the time, it goes beyond the purchasing power of society. In such a scenario, it can further create a hole in the people’s savings too.

The Law Of Supply And Demand Is Working

There are demands for plenty of products and services which are short in supply. It is difficult for businesses and industries to meet this sudden demand. As a result of this high demand and short supply, the prices of commodities are soaring. In short, the law of supply and demand is currently working in full force. There is currently an imbalance between supply and demand.

However, the good news is that soon the imbalance will fade away. In 2022, the inflation will be high because last year, it was low. It was supposed to happen before, and it is happening now. Many financial experts expected this inflation. It is here to stay for some time but will eventually fade away. We expect the inflation to go down next year, but it will be difficult for all the stakeholders to manage their finances this year.