Impact of Inflation on Households' Purchasing Power with Reference to Chennai City

Abstract

Introduction: Inflation is one of the major economic factors that influences household financial stability by reducing the purchasing power of money. A continuous increase in the prices of essential goods and services affects household expenditure patterns, savings, consumption behaviour, and overall standard of living. The present study, titled “Impact of Inflation on Households’ Purchasing Power with Reference to Chennai City,” aims to examine how rising inflation affects the purchasing capacity and financial decisions of households. Methods: The study focuses on the impact of inflation on major household expenditure components such as food, fuel, housing, healthcare, and education. A descriptive research design was adopted for the study, and primary data were collected from 200 households in Chennai City through a structured questionnaire. Secondary data were collected from government reports, Reserve Bank of India publications, Consumer Price Index (CPI) reports, journals, and other relevant sources. Statistical tools such as percentage analysis, mean score analysis, Chi-square test, correlation analysis, and multiple regression analysis were used for data interpretation. The findings of the study:  reveal that inflation has significantly reduced household purchasing power, with food price increases identified as the major concern among respondents. The analysis indicates a strong negative relationship between inflation and purchasing power, showing that higher inflation leads to reduced consumption capacity and lower savings. The study also finds that lower-income households are more severely affected due to their higher dependence on essential goods and limited financial flexibility. The study suggests:  that effective inflation management, improved financial literacy, better household budgeting practices, promotion of savings and investment awareness, and targeted government support measures are essential to reduce the adverse impact of inflation. The research concludes that maintaining price stability and strengthening household financial resilience are important for improving the economic well-being of families in Chennai City.