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4th July 2023 (7 Topics)

Greedflation

Context

During a recent surge in inflation, the prices of tomatoes have experienced a significant increase within a month, affecting multiple cities in India the most. Although there is a reasonable explanation for this price surge, some speculate that it could be attributed to a phenomenon known as 'greedflation'.

What is Greedflation?

  • Greedflation is currently on the rise in the United States and is one of the primary reasons why prices are being driven up in the country.
  • In basic terms, is the inflation and hike in prices not driven by economic flow, but by corporate greed.
  • It is termed as the inflation in prices of basic commodities which is driven by the companies to increase their profit margins.
  • Greedflation simply means big corporations squeezing out money from customers by jacking up the prices of their products, only to increase their profit margins.

‘Shrinkflation’

  • It refers to a reduction in the quantity or quality of a product while the price remains the same.
  • Production costs increase to a lesser extent while e-commerce businesses maintain the same retail price.
  • The main advantage is that users generally don’t spot these changes. 
  • However, they do notice that prices remain unchanged despite inflation. This strategy is less likely to damage the brand or retailer’s corporate image. 

Is greedflation happening in India?

  • Greedflation is on the rise in the United Kingdom and the US, but has not taken a fast pace in India yet.
  • However, due to the increasing privatization of industries in India, it is likely that greedflation will make its entry into the country soon if the government doesn’t regulate the prices to prevent the gouging out of customers.

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