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By:

Kaustubh Kale

10 September 2024 at 6:07:15 pm

Silent Money Killer: Loss of Buying Power

In personal finance, we often worry about losing money in the stock market, dislike the volatility associated with equities or mutual funds, or feel anxious about missing out on a hot investment tip. Yet the biggest threat to our wealth is far quieter and far more dangerous: loss of buying power. It is the invisible erosion of your money caused by inflation - a force that operates every single day, without pause, without headlines, and often without being noticed until it is too late....

Silent Money Killer: Loss of Buying Power

In personal finance, we often worry about losing money in the stock market, dislike the volatility associated with equities or mutual funds, or feel anxious about missing out on a hot investment tip. Yet the biggest threat to our wealth is far quieter and far more dangerous: loss of buying power. It is the invisible erosion of your money caused by inflation - a force that operates every single day, without pause, without headlines, and often without being noticed until it is too late.
Inflation does not take away your capital visibly. It does not reduce the number in your bank account. Instead, it reduces what that number can buy. A Rs 100 note today buys far less than what it did ten years ago. This gradual and relentless decline is what truly destroys long-term financial security. The real damage happens when people invest in financial products that earn less than 10 per cent returns, especially over long periods. India’s long-term inflation averages around 6 to 7 per cent. When you add lifestyle inflation - the rising cost of healthcare, education, housing, travel, and personal aspirations - your effective inflation rate is often much higher. So, if you are earning 5 to 8 per cent on your money, you are not growing your wealth. You are moving backward. This is why low-yield products, despite feeling safe, often end up becoming wealth destroyers. Your money appears protected, but its strength - its ability to buy goods, services, experiences, and opportunities - is weakening year after year. Fixed-income products like bank fixed deposits and recurring deposits are essential, but only for short-term goals within the next three years. Beyond that period, the returns simply do not keep pace with inflation. A few products are a financial mess - they are locked in for the long term with poor liquidity and still give less than 8 per cent returns, which creates major problems in your financial goals journey. To genuinely grow wealth, your investments must consistently outperform inflation and achieve more than 10 per cent returns. For long-term financial goals - whether 5, 10, or 20 years away - only a few asset classes have historically achieved this: Direct stocks Equities represent ownership in businesses. As companies grow their revenues and profits, shareholders participate in that growth. Over long horizons, equities remain one of the most reliable inflation-beating asset classes. Equity and hybrid mutual funds These funds offer equity-debt-gold diversification, professional management, and disciplined investment structures that are essential for long-term compounding. Gold Gold has been a time-tested hedge against inflation and periods of economic uncertainty. Ultimately, financial planning is not about protecting your principal. It is about protecting and enhancing your purchasing power. That is what funds your child’s education, your child’s marriage, your retirement lifestyle, and your long-term dreams. Inflation does not announce its arrival. It works silently. The only defense is intelligent asset allocation and a long-term investment mindset. Your money is supposed to work for you. Make sure it continues to do so - not just in numbers, but in real value. (The author is a Chartered Accountant and CFA (USA). Financial Advisor.Views personal. He could be reached on 9833133605.)

A Fissure in Two Maps

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Pakistan-occupied Kashmir’s unrest is less an argument about lines on a map than a symptom of a state that has forgotten large parts of itself and an opportunity for a more competent, patient politics.


For 75 years Pakistan has been an uneasy project. Its politics are brittle, its institutions have often been subordinated to the barracks, and its economy has laboured under mismanagement and graft. Less remarked, but equally corrosive, is the persistent regional imbalance that has hollowed out the state’s claim to legitimacy. The Punjab and Sindh have benefited while the peripheries have bled. Balochistan, Gilgit, and the portion of Kashmir administered by Pakistan (Pakistan-occupied Kashmir, or PoK) have long complained that their rivers, minerals and men have been taxed but their towns, roads and hospitals have not been built.


Those grievances are not abstract. They have helped to fertilise insurgency and alienation. The Balochistan Liberation Army’s campaign, decades of low-level violence and the chronic anger of sidelined elites are reminders that territorial control is not the same as political integration. In PoK, recent internet shutdowns, protests and crackdowns have dramatized a fact that should be obvious to any state serious about survival: if citizens feel voiceless and deprived of elementary services, their attachment to the political centre frays fast.


It is tempting to reduce the present moment to a binary of rightful sovereignty: either India’s or Pakistan’s. That temptation, however, is an avoidance of politics. Borders are products of history and force. Loyalties are made, over time, by governance, dignity and opportunity.


For New Delhi the spectacle offers both a moral challenge and a strategic opportunity. The moral case is straightforward: populations who are denied basic rights and development deserve a better fate. The strategic case is more delicate. India’s conduct in Jammu & Kashmir since 2019 has been applauded by some and criticised by others. Any suggestion that PoK should simply be folded into India is neither realistic nor soon to be realised by force. The only sustainable path requires persuasion through governance and the quiet work of winning hearts by improving lives.


That requires a recalibration of priorities. First, India needs to resist triumphalism and the crude rhetoric that reduces complex identities to slogans. PoK’s people are not merely the objects of propaganda; they are neighbours with grievances, memories and aspirations. Second, India should expand people-to-people links where possible: humanitarian outreach, cultural and academic exchanges, and connectivity initiatives that demonstrate the tangible benefits of better governance. Third, diplomacy must be patient and strategic. Bluster will only harden resistance.


Pakistan, for its part, faces a simple but painful choice: either re-embrace genuine federalism and equitable development, or continue to haemorrhage legitimacy in its peripheries. The centralised allocation of resources and the political dominance of a few provinces have fuelled separatist narratives. Delivering security without rights is a short-term remedy; development that is inclusive and visible is the only durable vaccine against fragmentation. Islamabad’s proclivity for securitised responses — curfews, internet blackouts and military operations — may suppress dissent for a time. Over the long run it deepens the grievance and gives insurgents a recruiting story.


There are regional implications, too. A Pakistan that cannot govern its borderlands is a less reliable partner in diplomacy and trade. China, which pours money into Pakistan through the China–Pakistan Economic Corridor, already quarrels with Islamabad about leaks and insurgency in Balochistan. India’s ability to demonstrate a competing model of governance in the neighbourhood would be the most persuasive argument against militarised nationalism.


None of this is a call for imperialism cloaked in development. Any durable change in PoK’s status must be the result of choices made by its people. That means creating conditions in which those choices are possible: an open information environment, protection for political dissent, and the rule of law. If India hopes to attract loyalties across the Line of Control, it will have to show it can be a better custodian of rights and prosperity than the alternative.


History teaches an uncomfortable truth: territories do not re-attach themselves because politicians issue declarations; they re-integrate when governance, dignity and opportunity make the case for a different future. Pakistan’s failure to spread the fruits of development evenly across its terrain has made that argument harder at home and has opened a small window for its neighbour. New Delhi, however, should treat that window with prudence. Winning a place in people’s lives is slow work, but it is the only work that endures.


(The writer is a foreign affairs expert. Views personal)

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