Contents
Source: The post is based on the article “ExplainSpeaking: What is Greedflation? Does India also have it?” published in Indian Express on 27th June 2023
What is the News?
There is a growing consensus across the world that Greedflation is spiking inflation.
What is Inflation?
What is Greedflation?
Greedflation simply refers to a situation where corporate greed fuels inflation.
Instead of the traditional wage-price spiral, it is the profit-price spiral that drives inflation.
This can result in a significant rise in the overall price level, leading to a decline in the purchasing power of the currency and contributing to inflation.
In developed countries like Europe and the US, there is a growing consensus that greedflation is the main reason contributing to inflation.
Is Greedflation happening in India?
The Indian corporate sector has generated superlative profits in the post-pandemic period. Profits during recent times have been nearly thrice the profits corporates earned earlier.
Higher profits then can come only from: 1) higher sales (with the same profit margins) 2) higher profit margins (with the same level of sales) or 3) a combination of higher sales and higher profit margins.
What is contributing to higher profits of corporates in India?
According to CMIE, 60% of the growth in net profit can be attributed entirely to the increase in profit margin.
The increase in sales contributed an additional 36% and the rest was a bonus from a combination of the two.
Do these higher profits point to the existence of greedflation in India?
Data shows the existence of a sharp spike in profits.So, prima facie there is a very good chance that corporate greed also played a key role in spiking the inflation rate in India.
Discover more from Free UPSC IAS Preparation Syllabus and Materials For Aspirants
Subscribe to get the latest posts sent to your email.
