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Economy contending with Cancer of Shrink-flation

 Economy contending with Cancer of Shrink-flation




Our Economy is contending with cancer of Shrinkflation(Not only limited to FMGC sector it grabbed Auto & Real Estate sector too)


Shrinkflation- It is recently coined term in economy, it means situation of economy where Goods are available for same or slightly increase price but the quantity or size of good reduce at real time as compare to past. It shows Economy is at situation where Purchasing power of people not increasing in proportionate of price hike of goods this event occurs because of Inflation goes up in short period of time. 

In such case, where peoples Purchasing power stagnant or declining but prices of goods rises due to multiples events, Corporates of manufacturers trying to increase their sales by meeting consumers price point. To fulfil such goals manufactures come up with an idea by keeping price constant they reduce quantity or size of product. E.g.- If packet of 50 biscuits had price 100 rupees, but due to inflation manufacturer increase price to 125 Rupee for 50 biscuits. but consumers who have stagnant purchasing power they start avoiding to buy these biscuits and then sales of company starts declining. so to mitigate this problem company introduce an idea they start selling their packet of biscuits at 100 rupees but now their 100 rupees packet contains only 35 biscuits which earlier 50 biscuits. so impact of this consumer may start buying again these biscuit packet as it available at same earlier price.


Below are two actual examples of such events-


1. Few years back Honda shine 125CC On road price was around 72K INR, but now it reaches to 98K INR(FY 2023). Today 15th March 2023 Honda launch 99CC version at price point around 64K INR(may be ex-showroom price) by intension to sales may boost by this move. So company reduce the engine size to provide bikes at lower price.


2. Around 2008 Lehman Crisis in Pune's Real Estate 1BHK property had on an average carpet area of 600 Sq.Ft. Now in 2023 1BHK have on an average carpet area of 410 Sq.Ft. in Pune. So here also The carpet area's of real estates reduced developers to meet price point of consumers.

(Note: There is very less inventory of 1BHK properties in Pune now a days as compare to inventory of 2/3 BHK. This may sign of wealth imbalance and it may indicate there is group of consumers in economy who have demand of larger size property because they have better amount of purchasing power and less inventory of 1BHK shows there is lower demand of it due to consumers not have sufficient purchasing power to buy property) 


Shrinkflation is like an cancer, it is easy to get cure if detect early and get early treatment. But if it not treated in early stage then if is difficult to cure.


Mayur Jagtap




For regular and daily small update 

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