The prices of milk, sugar and ghee have gone up considerably. You would have felt the pinch during Navratri and now again as you dress your dining table with sweets and savories. Life has not been very easy this year due to the rising inflation.
The overall cost of goods and services is also increasing because of inflation. To compound matters, theReserve Bank of India (RBI) has been raising key rates to tame inflation. The wholesale price index (WPI), consumer price index (CPI) or food inflation are different facets of this simple economic indicator known as inflation. Inflation reflects the value of money.
It is measured on a basket of commodities. Food products are only one component. If other components fall and food items keep rising, inflation will still show an overall fall. It measures how much the rise is over time.
For example, if tomatoes were priced at 30 per kilo last year, and this year it is at 32, the inflation comes to about 6.66%. It may sound reasonable. But it is on a high base of 30 per kg.
Impact on consumer
The demand for basic necessities like food is inelastic to price rise. Hence, if food prices go up, it would eat into your savings as you cannot cut down on such needs beyond a point.
Inflation and Investments
Inflation also eats into the value of idle cash lying in your bank account. Similarly, on investments, you have to compute the real rate of return to assess the impact of inflation. Fixed deposits, PPF or NSC assure safe returns but are not capable of beating inflation.Inflation simply erodes the value of your investment. Let us assume you invested 1,000 in a 
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