Rising prices and coping strategies of urban families in India

This study examines how Indian urban households coped with rising prices over the period 1995–1996 to 1999–2000. It provides evidence of cost of living indices and the coping strategies of urban households belonging to different income groups. Although there has been a lively debate on inflation and related issues, most of the studies were macro studies, which have not paid explicit attention to the impact of rising prices on the coping and financial management responses of the affected families. This paper is a part of a larger cross‐sectional study on the impact of rising prices on quality of life and financial management practices of Indian urban households belonging to five different income groups. This paper provides the evidence on cost of living indices and the coping strategies adopted by these households to combat an otherwise hostile economic environment. It found that the impact of cost of living indices differs across different income groups depending upon the composition of the consumption basket and the proportion of expenditure incurred on specific items of that basket. It is also observed that rational responses of households played an important role in coping with increased cost of living. The evidence suggests that a wide range of coping strategies is adopted by households such as consumption reallocation and seeking increased earning opportunities as part of their backward and forward coping strategies.