Clothing and electronics will get more expensive next year
When you pay more for clothes this year compared to the same time last year, you see inflation. The market is already hot with inflation, where the prices of vegetables, electronics, etc. are already high. On top of that, the government has decided to increase the Goods and Services Tax (GST) on finished goods from 5% to 12%. It means a bigger hole in the pockets of the common man.
What’s going to happen ?
Textile rates (including synthetic yarns, fabric, tent, blanket, accessories, rugs, etc.) have been increased to 12%. Meanwhile, prices for TVs, smartphones, air conditioners and refrigerators are expected to rise 5-6% by next month, and another price hike is expected in January of next year. An important point to note here is that agricultural commodities have increased due to crop damage due to unpredictable downpours which damaged supplies and production.
Who is concerned ?
The space of MSMEs (micro, small and medium enterprises) will be greatly affected. It has only been a while since COVID-19 fears subsided, and such a large GST hike will directly drive up prices for consumers and boost inflation, resulting in weak demand. This means that we are back to square one.
Fabric production in India is largely unorganized. Raising the GST rate to 12% would hit workers in power and manual looms. It seems that the market can absorb a 3-4% rise, but a sharp 7% rise will affect workers in the MSME sector. The economy was just starting to get back into shape, and it got twisted again.
Why should this bother you?
Well, because it’s going to affect our monthly household expenses. As we said earlier, agricultural commodities will now be sold at a higher price. This means that the finished products will also cost more. The overall food consumption will increase if the cost of raw materials is higher. But this is not only the case with India, other countries are suffering as well. October data from the United States shows that it recorded the highest rate of inflation in three decades. Meanwhile, Germany has an inflation rate of 4.5%, Russia has over 7%, Brazil has over 10%, Turkey has 20%, and Argentina has 50%.
What awaits us?
A higher GST rate will remain a worrying fact for an ordinary taxpayer in India. The truth is that if the international price of crude oil does not simmer, the rate of inflation will tend to oscillate at high levels. If core inflation rises, the RBI will have to step in. So far, the central bank has remained sympathetic to the demands of an ordinary man, it is expected to continue to do the same in the near future.
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Posted on: Tuesday November 23, 2021 4:34 PM IST