Sunday, June 22, 2008

Soaring cost of living- yuppies feel the pinch!

The Indian Express on Sunday had a story about this IT professional, Srijesh Nair, who's struggling to make both ends meet because of the home loan burden he is carrying.

Nair's annual income is Rs 14 lakh. His home loan monthly payment is Rs 17,000. The increase in interest rates in recent months meant an additional Rs 2000. Nair says that he found it difficult to maintain his standard of living in consequence. Nair disposed of stock options and other assets to shrink the home loan outstanding.

I read the story in some amazement. Nair's annual pay translates into a monthly income of around Rs 1 lakh (assuming that Rs 14 lakh includes company contribution to PF). Take away income tax of Rs 34,000. That would leave Nair with Rs 66,000. The home loan at the increased rate of interest would mean a deduction of Rs 19,000. So, Nair would have had Rs 47,000 to cover his monthly expenses. Evidently, this was just adequate, giving Nair's standards of living, so Nair has no savings to dip into.

I do not for a moment wish to question any of this- I accept that Nair's predicament is for real. The question that troubles me is: if this is the situation with somebody making over a lakh of rupees a month, what about millions of others, including salaried employees, who make a lot less? The Arjun Sengupta committee on the unorganised sector showed that the majority of workers were making barely Rs 20 a day or Rs 600 a month.

The question is particularly troubling at a time when the inflation rate is rising. For millions, even a small rise in prices, especially of food, is the difference between subsistence and starvation. When you read stories like Nair's, you begin to understand why a rising inflation rate spells doom for the government of the day.

1 comment:

S Praveen Kumar said...

when income increases, people tend to spend as much. this 14 lakh p.a. person is likely has a car loan to pay, filled his house with furnitures and durables bought on emi and sends his son/daughter to a school whose fees is Rs.64000 per year for kindergarten level. and god knows what else. i actually know one such person.