Cost of living up mani-fold globally but India fares quite well: SBI

There has been a deterioration in the cost of living in the aftermath of global mayhem caused by sky-high food and energy prices but India still performs significantly better compared to countries that are supposed to be the “epitome of sound macro-management”, SBI Research says in its latest report. With the central banks across countries in the midst of a rate hike cycle, the cost of owning a house in respective countries, too, has also jumped manifold.

India still seems to stand like an oasis in this era of uncertainty, says SBI. The report says while the global economy continues to ravage by uncertainties, India has done quite well in managing the cost of living in comparison with other countries. Showing remarkable resilience, India saw 72% of the $14.7 billion capital outflows till July 29 in FY23 already recovered. SBI says portfolio inflows in FY23 in November are also strong at $4.1 billion and are still counting.

According to SBI Research, in rupee terms, if the household budget/cost of living was ₹100 in September 2021 across all countries, it has now increased by ₹12 in both US & India, but it has increased by ₹20 in Germany and ₹23 in the UK. In terms of increase in housing prices, India again performs the best. What costs ₹100 in Sep’21 across countries, is now up by ₹21 in the US, ₹30 in the UK, ₹21 in Germany and ₹6 in India, finds SBI. India also fares better than the rest in terms of energy prices.

In terms of increase in energy prices, what costs ₹100 in Sep’21 across countries, is now up by ₹12 in the US, a staggering ₹93 in the UK and ₹62 in Germany and ₹16 in India.

To understand how India has performed in terms of the cost of living, in a common currency, the cost of living in India was compared with the US, the UK and Germany by adjusting each country’s exchange rate (dollar, euro and pound in our case) to achieve parity with the rupee. "Our analysis was thus to measure the cost of living by using a uniform measurement of prices across different countries by using the rupee as the exchange rate," says the SBI.

Since the beginning of the Ukraine-Russia conflict, there has been a significant surge in prices across developed as well as emerging economies. The US job market, too, is still quite strong and the Fed may have to do a few more rate hikes to have a firm grip on the labour market.

India, like its global peers, has been impacted by soaring inflation, prompting the RBI to announce tightening monetary measures. Retail inflation fell to a three-month low of 6.77% in October, down from 7.41% in September 2022. However, retail inflation has remained above the Reserve Bank of India's (RBI) upper tolerance band of 6% for the 10th consecutive month.

According to the SBI Research, while looking at CPI indexes of respective countries, it was observed that CPI has risen by 22.5 USD in the USA, 12.1 INR in India, 11.4 Pound in the UK, and 11 Euro in Germany, in one year from September 2021 to September 2022.