Why are people complaining about expenses when the market is reporting high growth?

It has never been very clear to people who do not understand economics. Market growth comes with high expense. When the market is flourishing, and different sectors are experiencing decent growth, the price of many consumer goods will grow too, which, if left unchecked, can lead to inflation.

How does the economy grow? Broadly because the end-consumers are purchasing/selling more items. They are bringing more money into the market. The supply of the money in the market has gone up.

Now, when people have more money – meaning, when they have a higher purchasing power – they would be willing to pay more for a product than other buyers. At the same time, in the short and medium run, the quantity of outputs remains the same due to many possible reasons, including the limitation in production capacity and manpower. High demand, limited supply— a classic law of demand; at such time, the price of the products will rise. And if the price rise is persistent, inflation it is!

So, you can see, even when the market is growing, and people have higher purchasing power, high expense usually persists. When other economic factors remain adjusted, you can call inflation as a by-product of this scenario.

So, if you see people complaining about the high expense of living even when the market is reporting consistent growth, understand that their complaints are economically justified.

There’s a reason why Reserve Bank of India has announced to increase the repo rate by 25 points. The move comes to curb down the money supply in the market in a hope to contain inflation. This move would certainly limit the market growththat it’s experiencing right now. But it would help in holding back the growing expense. With less purchasing power, people wouldn’t spend as liberally as they would otherwise do. Demand for products will fall; and so will their price.

NOW NOTE: the above theory is explained very broadly. Of course, the relationship between economic/market growth and rising expense/inflation is much more complex that depends on an awful lot of factors, including CPI, unemployment rate, GPD, global economy, imports, and exports, and so much more.

But hopefully, you have understood that just because the market is reporting good growth that doesn’t mean everythingin the economy is on the right track. When you see people cribbing about the expense, they aren’t doing that out of fun or to critic the government. They have legitimate problems that usually DO NOT reflect in so many economic metricslike GDP.