The Economics of Why Everything Feels More Expensive Even When Inflation is “Low”

You check the news and they say inflation is cooling down. The numbers look fine on paper. And yet somehow every time you go to a grocery store, order food online, or just exist as a human being in 2026 it feels like your money is doing less than it did two years ago. You’re not imagining it. And the explanation is actually more interesting than most people think.

The first thing to understand is that the inflation number you see reported the CPI, the consumer price index — is an average. It takes hundreds of different goods and services, weighs them together, and spits out one number. When that number comes down it means prices on average are rising slower. It does not mean prices came down. It does not mean things got cheaper. It just means they got more expensive at a slower pace. So if eggs were 40% more expensive in 2023 and now they’re only 4% more expensive in 2026 — that’s “low inflation.” But you’re still paying 40% more for eggs than you were three years ago. The baseline shifted and it never came back.

This is called the price level problem and economists talk about it constantly but it almost never makes it into mainstream conversation. People experience prices, not rates of change. Your brain doesn’t register that inflation slowed down — it registers that the same grocery run that cost you 800 rupees in 2022 now costs 1200. The number on the news became irrelevant the moment the damage was already done.

There’s also something called shrinkflation that makes this worse and is genuinely one of the most frustrating things in modern economics. Companies don’t always raise prices directly they just give you less for the same price. Your packet of chips is lighter. Your shampoo bottle is smaller. Your chocolate bar is thinner. The price tag looks the same so it doesn’t show up clearly in inflation data, but you are absolutely paying more per unit than you were before. This has been happening across FMCG companies in India and globally for the past three years at a scale most people haven’t fully clocked.

And then there’s the stuff that inflation barely captures at all rent, education, dining out, experiences. The CPI weightage for these categories doesn’t always reflect how much of your actual income goes toward them. If you live in Mumbai or Bangalore, rent has gone up in a way that no official number fully communicates. Eating out feels expensive not because restaurants are being greedy but because their input costs ingredients, delivery fees, staff wages all went up and they passed it on quietly through portion sizes and menu restructuring rather than obvious price hikes.

The uncomfortable truth is that “low inflation” is a macroeconomic metric designed to measure the health of an economy at a systemic level. It was never designed to tell you whether your life feels affordable. Those are two completely different questions and we made the mistake of treating them as the same one. The economy can be technically fine while millions of people feel genuinely squeezed and both things can be true at the same time.

So no, you’re not bad at managing money. You’re not spending too much on things you shouldn’t. The money just actually does less now. The baseline moved, the wages didn’t always keep up, and the number on the news never told you the full story.