• Over population: The population growth rate in India is high as 1.7 per 1000. Large population leads to increasing demand, but supply was not equal to the demand. So, the normal price level will be going an higher. So it affect purchasing power, especially in rural population.
• Increasing prices of essential goods: Even though there has been a constant growth in the GDP and growth opportunities in the Indian economy, there have been steady increase in the prices of essential goods. The continuous rise in the prices erodes the purchasing power and adversely affect the poor people. During 2015-16 an average rate of 2% flood inflation, the prices of pulses rose by about 40%.
• Demand for goods: When demand for goods increases, the price of goods increases then the purchasing power is affected.
• Price of goods affect the value of currency: When the price increases the purchasing power decreases and finally the value of currency decreases and vice versa.
• Production and supply of goods: The production and supply of goods decline, the price of goods increases, then the purchasing power is affected.
• Poverty and inequality: There exists a huge economic disparity in the Indian economy. The proportion of income and assets owned by the top 10% of Indian goes on increasing. This has led to an increase in the poverty level in society. Generally purchasing power is affected by poverty and unequal distribution of wealth also.

Purchasing power affects every aspect of economics, from consumers buying goods to investors and stock prices to a country’s economic prosperity. As such, a country’s government institutes policies and regulations to protect a currency’s purchasing power and keep an economy healthy. One method to monitor purchasing power is through the Consumer Price Index.