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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 New Chapter in Asia

As the global trade environment shifts, India and Singapore embrace a comprehensive partnership to bolster commerce, technology and security in the Indo-Pacific.

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Last week, Singapore’s Prime Minister, Lawrence Wong, visited New Delhi in a trip that heralded a new age of partnership between the two nations. The relationship between the two nations, spanning over six decades, has evolved from diplomatic cordiality into a multifaceted alliance centred on commerce, strategic cooperation and technological collaboration. In the context of mounting global economic turbulence, particularly following recent American tariff measures targeting India, Singapore has emerged as a crucial gateway for New Delhi to engage Southeast Asia and beyond.


At the heart of this visit was the signing of six memoranda of understanding (MoUs), which together mark a turning point in bilateral relations. These agreements cover a wide array of sectors, including digitalisation of banking services, skill development, advanced manufacturing, semiconductor production, aviation maintenance and urban water management. Collectively, they embody a roadmap for a “golden partnership” as Prime Minister Narendra Modi described it that is set to accelerate both economic growth and cultural exchange.


Singapore’s strategic location makes it one of the world’s foremost shipping and trade hubs. For India, the partnership holds particular significance. With the ambition to become a manufacturing powerhouse, India is keen to learn from Singapore’s model of sustainable and high-tech industrialisation. In return, Singapore, which is already India’s largest foreign direct investor, stands to deepen its footprint in a rapidly growing market, leveraging Indian manpower and entrepreneurial dynamism.


The strategic partnership also addresses the need for resilience in an increasingly volatile global trading environment. The imposition of tariffs by the United States has accelerated India’s efforts to diversify its trade and investment channels. Singapore, with its robust connectivity to Europe and Africa, offers a natural partner to bridge these emerging gaps. Notably, India’s recent free trade agreements with the United Kingdom and others signal a clear shift in its economic diplomacy and Singapore is well-positioned to help operationalise these accords.


Beyond commerce, the skill development cooperation is poised to become a game-changer. India is rapidly becoming the world’s skill capital, producing over a billion technically trained individuals. Yet, what it lacks in some instances is structured vocational training aligned to industry needs. Singapore’s globally reputed institutions are set to play a key role in addressing this gap. The MoU on skills development will facilitate exchange programs, joint curriculum design, and specialised training schemes, with an initial focus on empowering India’s micro, small and medium enterprises (MSMEs).


Maritime cooperation was another highlight of the visit. India’s long coastline and growing ambitions in naval and commercial shipping align well with Singapore’s expertise in port management and maritime logistics. A notable outcome was the MoU on the modernisation of India’s Jawaharlal Nehru Port Trust (JNPT), which aims to improve infrastructure, efficiency, and sustainability of one of India’s busiest trade gateways. In an era of intensifying Indo-Pacific competition, such cooperation contributes not only to economic growth but also regional security.


Technology and innovation form the third pillar of this emerging relationship. From artificial intelligence to space research, the India-Singapore dialogue is intensifying collaboration in cutting-edge domains. Both countries are jointly exploring the establishment of green and digital shipping corridors, enabling the creation of efficient, low-emission supply chains. Singapore’s experience in urban planning and smart infrastructure will also assist India’s ambitious smart city and semiconductors initiatives, reinforcing the vision of shared technological advancement.


The partnership’s cultural dimension was not forgotten. With increasing people-to-people ties, the two nations are set to deepen exchanges in education, tourism and research. The emphasis on urban water management, now a shared endeavour, further exemplifies the breadth of cooperation.


This visit comes at a time when India and Singapore are confronting common challenges, from economic uncertainty to security threats such as terrorism. Both countries have reaffirmed a zero-tolerance policy toward extremism, emphasizing that their cooperation transcends mere diplomacy and is grounded in shared values of peace, progress and rule of law.


The trajectory set by this visit is more than symbolic. It signals a mature, pragmatic partnership that other regional players may soon emulate. In an era defined by shifting alliances and trade realignments, India and Singapore are demonstrating that strategic cooperation, rooted in mutual respect and economic logic, can chart a new course for the Indo-Pacific. As both countries look to the future, their shared roadmap stands as a testament to the enduring power of partnership in an uncertain world.


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

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