Why in the news?

As input prices turn inflationary, the FMCG (Fast-Moving Consumer Goods) segment faces the spectre of shrinking packs, impacting consumer choices and industry dynamics.

What are FMCGs?

Fast-moving consumer goods, also known as consumer packaged goods, are products that are sold quickly and at a relatively low cost.
Examples include non-durable household goods such as packaged foods, beverages, toiletries, candies, cosmetics, over-the-counter drugs, dry goods, and other consumables.

Shrinkflation is a business practice where companies reduce the size or quantity of a product while keeping its price the same.

Cost Management: It helps companies manage rising production costs, such as raw materials or labor, without sacrificing profitability.
Market Competition: In competitive markets, companies may use shrinkflation to maintain their market share by keeping their prices competitive.

Consumer Perception: If consumers notice the change, it can lead to negative perceptions of the brand, loss of trust, and reduced customer loyalty.
Accuracy of Inflation Measurement: Shrinkflation complicates accurate measures of inflation since the price remains constant while the quantity decreases.
Limitations: Companies can only implement shrinkflation discreetly and for a limited number of times before consumers become aware and react negatively. Overuse can damage brand reputation.

[2015] With 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

(d) Increased money circulation helps in controlling the inflation