When Life gives you Lemons

 

The English Language has an idiom: To buy a lemon. It means to purchase something that is worthless, broken, unsatisfactory, not of its purported value, or disappointing. But these days cost of Lemons in India exactly contradicts this. These days Lemons cost a fortune. There are few quotes that ask you to act in a certain way if Life gives you a Lemon. For example, when life gives you lemons make lemonade. Or when life gives you lemons, you exchange them at the store for something more edible. When life gives you lemons, chunk it right back. When life gives you lemons, squirt someone in the eye. These days if life gives you lemons you are rich, thanks to Inflation.   

Inflation really hurts everyone. Here in the US, despite some good numbers on employment in terms of economic recovery, Americans still say that the economy is sliding down and that financial conditions are getting worse. US Commerce Department also reported that prices increased 6.6 percent year-over-year in March, the sharpest rise in 40 years, with food costs up more than 9 percent and energy costs up a whopping 34 percent. Wages, though growing at their fastest pace in decades, are not keeping up with the price increases for many Americans. Though many economists claim that the economy now really is not as bad as it was in, say, 2008, when the financial system was in recession and millions of homeowners were underwater on their mortgages.  Even then the economy feels so bad to so many. The direction of the economy feels uncertain. The Federal Reserve is attempting to tamp down on inflation without triggering a recession.  

The economy feels so bad because it feels so bad for so many people. Downturns tend to cause concentrated economic pain for a few, leaving many others unaffected. During the Great Recession and the COVID recession, there was rising unemployment. But most Americans did not lose their jobs, and wealthy Americans were unlikely to be unemployed. Everyone experienced the fear of living through an economic crisis, with many people suffering from reduced employment opportunities, lower wage growth, and so on. But the pain was uneven.  

In contrast, nobody escapes inflation, even if rising prices affect some people far more than others. That includes people on a fixed income. It also includes lower-income families, who have less room in their budgets to absorb higher prices. They have to cut costs by switching from nice goods to bargain-basement ones. Indeed, the lower part of the income spectrum has been experiencing higher rates of inflation than the upper part. Today’s inflation comes on top of an affordability crisis. The price of housing is sapping budgets and forcing families to make harsh decisions to keep down costs: living far away from family, commuting long distances, giving up on having a third kid, renting forever instead of ever trying to buy. The costs of child care, elder care, higher education, and medical care remain outrageous as well—affecting families far up the income scale as well while those at the bottom are the most burdened. But it is also pushing up gas prices and grocery bills when rent was too expensive, to begin with, and child care was priced like a luxury good already, and as US Government is worried about triggering a new downturn. No wonder everyone is upset about the state of the economy.  

Back in India where life is hurt by Lemons,  Geopolitical tensions, heat wave impacting food prices, especially wheat, along with an overall increase in transportation costs due to fuel price hikes have added to the surge in the inflation rate, which had risen to a  high of 6.95 percent in March. Despite prices of several key items like some vegetables and pulses moderating, this was likely offset by further rises in the prices of cereals, meat, and fruits in April. Unsurprisingly, a lot of the sequential increases are likely being driven by edible oil prices, which continued to trend higher in April, and are set to rise further in May given Indonesia’s recent ban on edible oil exports. At the same time, both cooking gas and kerosene prices increased sharply in April. Revisions in electricity tariffs also likely pushed up power costs in some states. For the whole financial year, economists expect the inflation rate to be higher than 6 %, which is over the upper band of the medium-term inflation target of the RBI. The RBI further hiked the repo rate by 40 basis points amid worries over domestic food prices given their sensitivity to India’s political economy. India’s economy is consumption-driven and experts say that food inflation is hitting people’s spending power. Though food grain productivity has been at a record high, the increasing fuel prices have dampened the supply chain due to high transportation costs. Russia and Ukraine are major global suppliers of wheat, sunflower oil, and fertilizers, and disruptions to these products have pushed up prices. In India, which sources most of its sunflower oil from Ukraine, the price of the commodity has doubled since the start of the war in February. Coming back to Lemons, due to the summer arriving earlier than expected, there is a high demand for lemons. However, the natural calamities across the country and the cyclone affecting the lemon crop in Gujarat have created a shortage in supply.   

Everyone is hurt even in India due to Inflation. In fact, Inflation is hurting every country on this planet. Experts in the UK predict that the inflation rate could hit more than 10%. Rising food and energy price inflation limits the space for the Peoples Bank of China to cut interest rates, despite the rapidly worsening economy. Life is giving Lemons to everyone and everywhere. There is no respite in the near future unless those at the helm especially those who have a say on actual and trade wars, and supply chains decide to ease out things and enable people to make Lemonade out of them.