Recession – the hard reality to live upon

A year back, the industry was blooming like anything unaware of the sleeping giant. Market was up and individuals living happy and luxurious lives. With the reminisce of a recession just seven years back, no one was expecting or prepared for yet another turmoil in near future. And adding to the induced price hikes in the market, banks started lending more and more money with very little guaranty and many times at floating interests. Mortgaging appeared like an easy options for banks and they go on to lend as much as personnel loans just looking at the jobs in hand alone. With a chunk of money flowing into individuals’ hand, they never bothered to indulge in safe investments. Instead they believed in speculative market and borrowed short term, lump amounts on very high interest rates and deposited in the market. As the land prices started shooting up, instead of speculating the sudden price hike, a majority population started investing in real estate, and finance companies were making their profit of the life time. Unnoticed, a lot of black money was also under transaction which added to reducing the money value. The chain spending went on till the liquid cash with the financing agencies reduced to bare minimum.

With more money in market, value of money gradually decreased, and inflation started griping the pace. As the inflation rate was expected to touch 13.2%, government undertook various measures to bring it under control.

Inflation

If we consider the food inflation, it will be unnoticed by the upper class people since they can easily afford double, triple prices on edible goods. On the other hand, the increased food price severely affects the daily waged, low earning people. My first memory with inflation was sometimes back in my school days, when the onion price shoot up so high that it disappeared almost completely from our household for sometime. It was an example for demand driven/reduced product volume inflation. If the price of a single commodity shoots up we can easily adapt to live without that item. Even then the supply chain is somewhat balanced since the low volume production was still giving same income to the producers owing to price hikes. So it can be easily seen that food inflation is reaching up to each and every individual, sometimes noticed and sometimes unnoticed.
And some of the best ways government could adopt to help those below poverty line is to provide essential commodities at reduced prices. And this can also be done up to some extent only.

If we take inflation as a general term, it is not only food inflation, but, the price hike present in all sectors - food, oil, wages, land, essential commodities etc. And it takes up the cyclic steps. As food price shoots up, food import will become a major burden for countries those import food and food products. On the other hand, it will earn more revenue to countries those export food items. On the contrary, the food importing countries may be the major oil exporters and they will compensate for food import losses on oil export profits. Also there will be a lot of dependent business models in these countries like construction, infrastructure development, tourism etc. With an idea of earning some increased profits, some industries gradually induced price hikes, and so their related industries also. As a result, the prices went beyond the base values manifolds. As the wages was also shooting up, people neglected the hikes and thereby promoting them. A recent survey noted out that the average income with the middle class people in India was pretty high compared with many other developing countries. This was not prevalent in India alone, but observed in many others, and the average expenditure went above safe limits also. Share market and short term investments were hitting gold for a long time. Companies listed higher margins counting the total assets rather than liquid money in hand and go on lending till the liquid cash necessary for daily business reduced to nothing so that they were forced file bankruptcy even though they could saved the situation with proper planning.