If Central Government has given a pay rise of 21%, how come we say 12% inflation rate is high.?

Question

I am not a finance expert. But I think Inflation is dependent on pay rise. Now since central government has given a pay rise of 21%, everyone will ask for same pay rise. This applies to lower level like a vegetable vendor to. This vendor might not know @ pay rises, but he will see that people are ready to pay, so he will ask for more, thus pay rise, & rise in inflation. I can say weather this pay rise is right or wrong, but it will definitely rise the inflation.

Answer 1

uh, is this the US???  central government???  i will be happy to see 2-5% in my scientific field ...

Answer 2

Unfortunately it is not as simple as that. First of all only the central Govt employees got the pay hike which means maybe a few million people where as the population of the country is in billion.

Secondly and more importantly the pay hike of 21% doesn't come every year and is maybe once in ten year  where as the inflation number of 12% is rising price Week on Week.

The vegetable vendor you mention in example would get his high price only if he is the only vegetable vendor in the whole country. When there is excess production and prices drop all vegetable vendors also have to compete to sell their stuff and that brings the prices lower.

The pay hike in it self can not give rise to more inflation , infact it is a relief to people to cope with rising inflation.