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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.)

Central Asia’s Middle-Power Rise and India’s Eurasian Strategy

India stands to benefit from middle powers reshaping the region.

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In April, the EU held its first EU–Central Asia Leaders’ Summit in Samarkand with Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan, pledging €13.2 billion under the Global Gateway initiative. Over €10 billion has since been mobilised for infrastructure, logistics, energy and digital connectivity, with a critical minerals roadmap underway.


In parallel, China held a high-profile China–Central Asia Summit in Astana in June, offering an alternative engagement model. These moves signal a major geopolitical shift: Central Asia is no longer a passive arena for great-power rivalry but an increasingly assertive bloc of middle powers.


Middle power in Central Asia

Middle powers are defined less by size or military strength than by their ability to shape regional or global outcomes through soft power, coalition-building, norm-setting and diplomacy.


In Central Asia, Kazakhstan exemplifies this model as the region’s economic hub and most experienced diplomatic actor. It balances between Russia and the West while deepening ties with Türkiye, China and the Gulf. Its diversified defence procurement, role in energy transition dialogues and leadership in regional infrastructure mark it as a clear middle power.


Uzbekistan, centrally located with a large population and reformist leadership, is emerging as a logistical and diplomatic hub. It has strengthened economic and cultural ties with Türkiye, invested in South Caucasus transit routes, and plays a key role in regional energy and digital projects.


Turkmenistan, Kyrgyzstan and Tajikistan, often seen as peripheral, gain niche leverage through the C5 platform, selective engagement with China and the Gulf, and strategic roles in energy transit and labour migration.


Why now? Four structural shifts

Central Asia’s rise as a middle-power bloc stems from four shifts.


First, the post-Ukraine realignment has weakened Russia’s economic and political influence, prompting states to diversify toward the EU, Türkiye, the Gulf, South Korea and Japan.


Second, competition over transport corridors has intensified. The Middle Corridor (Trans-Caspian International Transport Route) is gaining traction as an alternative to Russian routes for China–Europe trade. The EU co-finances rail links, ports and digital customs systems, though bottlenecks in Azerbaijan and maritime insurance gaps hinder full operation.


Third, platform diplomacy has surged. The C5+1 framework with the US now covers the Critical Minerals Dialogue, while the EU has launched a roadmap for raw materials and trade facilitation. China counters with concessional loans and digital infrastructure.


Fourth, internal reforms—especially in Kazakhstan and Uzbekistan—have expanded space for outward-looking, diversified diplomacy.


Arenas of middle-power behaviour

In connectivity and trade, the Middle Corridor is a flagship initiative. With EU support via the €10 billion Global Gateway, countries have launched pilot projects for customs harmonisation, digital waybills and port modernisation, notably in Kazakhstan and Georgia.


In energy and critical minerals, the EU–Central Asia declaration in April set a roadmap for uranium, copper, rare earths and green hydrogen. Kazakhstan and Uzbekistan are central, with European firms exploring long-term offtake deals and co-investment. India, already a uranium importer from Kazakhstan, is a key stakeholder.


Security hedging is another area. Central Asian states have joined military exercises with the US, Türkiye, China and India. While formal alliances are avoided, interest in diversifying security ties is growing amid Afghan instability and concerns over Russian unpredictability.


Norm-setting and convening power reflect a subtler shift. States increasingly use multilateral forums to position themselves as thought leaders on issues from food security to climate resilience. Hosting summits with both the EU and China in the same year underscores this rising confidence.


Implications for India

India’s interests in Central Asia are strategic. The region offers an energy diversification buffer—uranium, natural gas and critical minerals support India’s clean energy goals—and a key overland link to Europe, complementing maritime routes. Engagement has expanded via the “Connect Central Asia” policy, Chabahar port investments, the INSTC, and dialogues on rare earths and supply chains.


More remains to be done. Rather than new corridors, India should strengthen existing ones by improving border logistics, harmonising customs and aligning digital platforms. Linking Chabahar with the Middle Corridor’s digital standards could create a hybrid route of strategic value.


India should also boost soft-power investments: education partnerships, vocational training, standards harmonisation and joint R&D in energy and technology. These steps can position India as a long-term partner rather than a transactional actor. With China and the EU already investing, delaying risks India being sidelined in Eurasia.


Risks and constraints

Several challenges could undermine Central Asia’s middle-power trajectory. Corridor viability depends on resolving bottlenecks like cross-border tariffs, opaque customs and unreliable insurance—especially for Caspian Sea segments. Political fragility, border disputes (notably Kyrgyzstan–Tajikistan) and weak governance also threaten progress.


Great-power pushback remains a concern: Russia wields influence via energy and elite networks, while China’s economic weight can overshadow smaller players. The EU’s reliance on private capital, which may hesitate without guarantees, adds uncertainty. If overly cautious, India risks a reactive rather than proactive role.


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

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