Govind Singh Adhikari, 32, is working as a driver in Delhi. He supports a family of four that includes three children aged 2, 3 and 7 years and shoulders the burden of many expectations and responsibilities back in his village. Though he may be considered safely above the poverty line, earning a steady monthly income of Rs 5,000, yet if inflation keeps pushing up food prices, even he will not be able to provide his children a daily balanced meal. As the table below shows, inflation has already pushed his monthly budget beyond his salary.
Govind’s budget reveals the story of millions of Indians who live on fixed incomes and whose budgets are exceedingly vunerable to the vagaries of inflation.
• A 2006 RBI bulletin noted that rapid inflation has forced the prices of pulses to rise by 43% and that of vegetables by 57% from last year. This has made these sources of nutrition the most expensive and thereby reduced their share in the monthly budget.
• As a result of this compromise, this group consumes far fewer calories than recommended. The 9th Five Year Plan noted that the average intake of middle-income groups just about meets the recommended intake of 2,400 Kcal per person per day, while the lower income groups and industrial labour groups show a deficit of about 160 Kcal.
• The NSS report on Nutritional Intake in India 1999-2000, noted that urban people living below the poverty line (BPL) consumed 1,627 Kcal while those on the poverty line consumed 1,912 Kcal, both groups falling short of the recommended 2,400 Kcal.
• Living on a shoestring budget means that contingencies such as a medical emergency, death in the family, marriage of a relative or even a leaking roof translate into a substantial cut in these families’ food budget and consumption of nourishing food groups.
• To cope with inflation and emergencies most families turn to moneylenders who charge high interest rates which can go up to above 1000% annually. To pay back this money some turn to their employers or friends, often getting trapped in a vicious debt cycle, which is sometimes inherited by their children.
• Rising prices force these families to spend more than what they earn, making it impossible for them to save or invest in things like education, healthcare or housing.
• Being poor is costly but swelling inflation is making it prohibitively expensive. While price hike takes the wind out of most other income groups, it very nearly sinks 80% of the world’s population that lives on less than $2 a day. Largely ignored by the organised sector, they end up paying a premium for everything from rice to credit.
• This logic of poverty penalty is best explained by Michigan management guru CK Prahalad, who believes it to be a combined effect of local monopolies, inadequate access, poor distribution and strong traditional intermediaries.
• He notes that across the developing world, urban slum dwellers pay 4 to 100 times as much for drinking water as middle & upper class families. Food also costs them at least 20% to 30% more.
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