We have all been there. You are sitting with your grandparents, sipping chai, and they drop the classic line: “Humare zamaane mein, deshi ghee 5 rupaye kilo milta tha!” (In our times, pure ghee cost ₹5 per kg!).
You look at the current price tag—hovering somewhere above ₹600 or ₹700—and wonder, what happened?
That, my friends, is the invisible thief known as Inflation. It isn’t just an economic term thrown around by news anchors in suits; it is the reality that shrinks the packet of Parle-G biscuits in your hand while the price stays the same.
In this deep dive, we aren’t just looking at boring graphs. We are going to explore the dramatic history of inflation in India, how it toppled governments, changed how we save, and what it means for your wallet in 2026.
What is Inflation? (Samjho Saral Bhasha Mein)
In simple terms, inflation is the rate at which the prices of goods and services rise over time. Consequently, the purchasing power of your hard-earned Rupee falls.
Think of it this way: If you had ₹100 in the year 2000, you could arguably watch two movies in a theater and buy popcorn. Today, that same ₹100 might not even buy you the popcorn. The note is the same, but its value has eroded.
How Do We Measure It in India?
India doesn’t just guess inflation; we measure it using two primary “yardsticks”:
- WPI (Wholesale Price Index): This measures the price changes at the factory or wholesale level. It’s like checking the price of vegetables at the Mandi before they reach your local thela.
- CPI (Consumer Price Index): This is what impacts YOU. It tracks the price change of a “basket” of goods (food, fuel, housing, education) that a common Indian household buys.
- Note: Since 2014, the Reserve Bank of India (RBI) uses CPI as the main benchmark for setting interest rates.
The Great Indian Inflation Journey: A Historical Timeline
India’s relationship with inflation has been a rollercoaster ride, influenced by wars, monsoons, and global oil crises. Let’s travel back in time.
1. 1950s–1960s: The Early Struggles
Post-independence, India was rebuilding. Inflation was relatively moderate, mostly driven by agricultural dependency. However, the wars with China (1962) and Pakistan (1965), combined with severe droughts, started pushing prices up.
2. The Turbulent 1970s: The Nightmare Decade
If you ask your parents, they will tell you this was the hardest time.
- The Oil Shock: In 1973, global oil prices quadrupled. India, dependent on oil imports, was hit hard.
- The Peak: In 1974, inflation in India hit a historical high of nearly 30%!
- Impact: Essential commodities became scarce. This economic unrest was one of the triggers for political upheavals during that era.
3. The 1991 Crisis: A Turning Point
By the late 80s, fiscal indiscipline led to another crisis.
- The Situation: India had barely enough foreign exchange reserves to pay for 3 weeks of imports. Inflation was running at 13-14%.
- The Solution: The famous LPG Reforms (Liberalization, Privatization, Globalization) opened up the economy. While this eventually stabilized prices, the immediate aftermath saw high prices due to currency devaluation.
4. 2009–2013: The Double-Digit Era
Post the 2008 global financial crisis, India saw a period of stubborn inflation.
- Food inflation was rampant. “Onion prices” became a major election issue.
- CPI hovered near or above 10% for several years, eating into the savings of the middle class.
5. 2014–Present: The Inflation Targeting Era
A major shift happened in 2015-16. India officially adopted an Inflation Targeting Framework.
- The Goal: Keep inflation at 4%, with a tolerance band of +/- 2% (i.e., 2% to 6%).
- The Result: We saw a period of relative stability, until the COVID-19 pandemic disrupted supply chains in 2020-21, pushing inflation back up to 6-7%. By 2024-25, strict monetary policies helped cool it down to around 4.5 – 5%.
Data Snapshot: Inflation Decades at a Glance
| Era | Key Event | Approx. Inflation Peak | Impact on Common Man |
|---|---|---|---|
| 1970s | Oil Crisis & Drought | ~30% (1974) | Severe scarcity, hoarding, political unrest. |
| 1991 | Balance of Payments Crisis | ~13.8% | Rupee devalued, imported goods became costly. |
| 2009-13 | Global Financial Aftermath | ~12% | “Mehengai” became the top political issue; high food prices. |
| 2020-22 | COVID-19 Pandemic | ~7.8% | Supply chain breaks, high fuel taxes, medical inflation. |
| 2024-25 | Post-Pandemic Recovery | ~4-5% | Stabilization, though food prices remain volatile. |
(Source: Historical data derived from RBI and World Bank archives)
Why Does India Suffer from Inflation? (The “Kyun” Factor)
It’s not just one reason. In India, inflation is often a “Khichdi” of several ingredients:
- The Monsoon Effect (Food Inflation): India is still agrarian. A bad monsoon means expensive vegetables. If onions fail in Nashik, a family in Kolkata cries while cooking dinner.
- Crude Oil Dependency (Imported Inflation): We import over 80% of our oil. When wars happen in the Middle East or Russia-Ukraine, petrol prices in Mumbai and Delhi go up. This increases transport costs for everything.
- Demand-Pull: As the Indian middle class grows and incomes rise, people buy more cars, phones, and houses. When demand outstrips supply, prices rise.
- Rupee Depreciation: When the Dollar gets stronger against the Rupee, importing electronics, oil, and gold becomes costlier.
Real-Life Story: The Sharma Family’s Budget
Let’s look at a relatable case study to understand the feeling of inflation.
Meet Mr. Sharma (Retired Govt Employee)
- In 2010: Mr. Sharma’s household monthly grocery budget was ₹5,000. He bought full-cream milk, plenty of fruits, and saved money for FDs.
- In 2024: For the exact same basket of goods, his budget is now ₹12,000.
- The Problem: His pension grew, but not as fast as the price of milk and medicines. This is where inflation hurts the most—it attacks the fixed-income group (pensioners) the hardest.
Expert Tip: “Inflation is the tax you pay for living in a growing economy. You cannot avoid it, but you can outsmart it by investing in assets that beat inflation (like Equity or Gold) rather than keeping cash in a savings account.”
Conclusion: Taming the Beast
Inflation in India is inevitable. As a developing nation aiming to become a $5 Trillion economy, a little bit of inflation (healthy inflation) is actually a sign of growth. It motivates businesses to produce more.
However, for the Aam Aadmi, it remains a constant battle. The history of India shows us that we are resilient. We survived the 30% inflation of the 70s and the crisis of 91.
The Lesson? Don’t just save; invest. Understanding history helps us prepare for the future. The next time the price of tomatoes hits ₹100/kg, remember—it’s part of a cycle, and this too shall pass.
