The Impact of Inflation on Consumer Purchasing Power in India

Anaaya Jain

Abstract: This research will review the correlation between consumers' purchasing power and inflation in India 2015-2025. The paper discusses how various price increases affected the Indian consumers' capacity to maintain their level of consumption based on the CPI values, inflation rates and expenditure shares of each sector, and income estimates in nominal and real terms. Analysis revealed that there was a strong negative correlation between inflation and purchasing power. The regression coefficient of -1.287 means that the estimated loss of purchasing power is 1.287% for each 1% increase in inflation. This impact is particularly significant for industries such as food, energy, housing and transport as they contribute a significant portion to total household spending. The study finds that all consumers are not equal when it comes to the impact of inflation - lower income households are more vulnerable since a greater share of their income is spent on essential items.

Keywords: Inflation, Purchasing Power, Consumer Price Index, Real Income, Consumer Welfare, Household Expenditure