Economic Indicators and Various Reports On It- GDP, FD, EODB, WIR etc

What is Greedflation?


From UPSC perspective, the following things are important :

Prelims level: Greedflation, Wage-price spiral

Why in the News?

Political campaigns highlight inequality in India. Accusations suggest billionaires amass wealth through monopolistic control, dictating prices and suppressing real wages.

Monopoly Power and Economic Dynamics

  • Monopoly Influence: Billionaires often amass wealth through monopolistic control, enabling them to dictate prices and suppress real wages.
  • Consumption Conundrum: Higher mark-ups under monopolies lead to reduced real wages and diminished consumption power, hindering economic growth and investment.
  • Greedflation Impact: The phenomenon of “Greedflation,” where companies raise prices to bolster profit margins amidst multiple demand-and-supply shocks, exacerbates inflationary pressures, particularly observed in developed economies.

So what is Greedflation?

  • Definition: Greedflation, in essence, signifies that corporate greed is driving inflation, rather than the traditional wage-price spiral, leading to a profit-price spiral.
  • Corporate Exploitation: Companies exploit inflation by significantly raising prices, surpassing the need to cover increased costs, thereby maximizing profit margins and perpetuating inflation.
  • Profit-Price Spiral: Unlike the wage-price spiral, it involves companies exploiting inflation by excessively raising prices to maximize profit margins, triggering a cycle of inflation.

Illustrative Scenario

  • Crisis Dynamics: During crises such as natural disasters or pandemics, businesses often raise prices due to increased input costs.
  • Exploitative Practices: However, some businesses exploit the situation by engaging in excessive profit-making through significantly inflated price mark-ups.

Impact of Greedflation

  • Disproportionate Impact: Greedflation disproportionately affects low-income and middle-class individuals, diminishing their consumption and lowering living standards.
  • Wealth Disparities: While benefiting the wealthy by inflating asset values, it widens the wealth gap and exacerbates income inequality.
  • Market Instability: Sharp price increases and speculative activities driven by greed can create bubbles and unsustainable market conditions, heightening the risk of financial market crashes and crises.

Global Implications

  • Divergent Policies: Inflationary pressures from greedflation may lead to divergent policy responses among nations.
  • Trade and Geopolitical Risks: Conflicting strategies to combat inflation can exacerbate global imbalances, trade tensions, and geopolitical conflicts as countries prioritize their interests and competitiveness.


[2015] Which reference to inflation in India, which of the following statements is correct?

(a) Controlling the inflation in India is the responsibility of the Government of India only.

(b) The Reserve Bank of India has no role in controlling the inflation.

(c) Decreased money circulation helps in controlling the inflation.

(d) Increased money circulation helps in controlling the inflation.

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