Greedflation

July 1, 2023

GS Paper III Indian Economy

Context:

There is a growing consensus across the world that corporate greed is spiking inflation even as workers get doubly penalised by low wage increases and higher interest rates.

About Greedflation:

Greedflation simply means corporate greed is fuelling inflation. In other words, instead of the wage-price spiral, it is the profit-price spiral that is responsible for inflation.
It reflects the situation in which prices are going up not because workers are getting higher wages but because the companies — are making more profit.
Greedflation happens when a crisis like pandemic or disaster turns into an opportunity for businesses to make what are called supernormal profits.

What is the Wage-Price Spiral?

The wage-price spiral refers to a situation in which wages and prices in an economy rise.
It is often associated with inflationary pressures.

Greedflation in India:

Analysis by the Centre for Monitoring Indian Economy (CMIE):

Net profits of 4,293 listed companies reached Rs.2.9 trillion in the March 2023 quarter. This is over 3.5 times the average quarterly profit earned by listed companies till before the pandemic of 2020.
The Indian corporate sector has generated superlative profits in the post pandemic period. Profits during recent times have been nearly thrice the profits corporations earned earlier.

News Source: Indian Express