Inflation is a friend, not the enemy

At the time of the election, inflection becomes a big issue. NDA government had gone in 2004 because of inflation. The general public feels trouble in high inflation. They always want low inflation rate. Yes, inflation is evil because it depreciates rupee value and decreases the power of purchasing. Yes, it gives trouble in a very short period, like 3-6 month period only. But this impression remains in a very short period.
In the long term, inflation works inversely. Basically, inflation is a byproduct of the growth rate of the country. If growth rate become high then man, machine and material used more. And that creates a higher scarcity of all these 3 M’s. And that is called a higher demand condition as per economics theory. That higher demand crafts a higher rate of inflation.
But deepen thought is that high inflation never impacts a man in a long term like 1-5 years. Thus it is not much longer time which can affect common man life. Because that high inflation rate again comes in higher salaries, wages, profits to same person only. Like if inflation had increased 8% the previous year. Then next year that converts salaries, wages and profits also increase in next year. This will be a minimum of 8% per year. But actually, it comes about 16% per year. A common man average salaries, wages, and profits increase about double inflation.
Is it comes double of the inflation?, Yes because of income growth changes, with the inflation, technological growth, and personal growth.
Income growth = Inflation + technological growth + personal growth
“for last 10 years = 8% + 4% + 4% = 16%
Again above technological growth comes from a growth rate of the country. Which is proportional to inflation. This rate may be half of the inflation.
While high personnel growth is sustainable in financial word, only with high growth rate and high inflation.
Now In case of recession, growth rate comes down. So inflation may come down. But technological growth also comes down. Beside that sustainability of high personal growth also come down. So in case of recession, It may possible inflation may come down at 6% but total man income growth is also come down, it will be not more than 10%.
So as per the above statements if inflation become 6% than personal’s income grow only 10%. But when inflation becomes 8% than personal’s income take 16% growth. So personal’s growth comes high in high growth & inflation conditions.

If India remains in zero growth states than inflation never be zero. It will be 4% to 5%. Because of population increase pressure, thus inflation never is zero. But inflation increase with growth rate, but it may effective lesser. It increases but at a lesser rate than the growth rate. Inflation and growth rate gives higher income growth.
So common man has to understand if want high income growth rate than he has to bear high inflation also.