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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.)

‘Citizens should trust in the country’s leadership, and not advocate for action unilaterally’

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With public sentiment running high after the Pahalgam killings and an ever-growing clamour for military retaliation against Pakistan, Vijay Manohar Gore, a former Second-in-Command in the Ministry of Home Affairs, sat down with Ruddhi Phadke, News Editor, The Perfect Voice, to reflect on the shifting contours of terrorism in Kashmir. In the second part of this exclusive interview, he reflects on whether war is a viable solution, on the evolving nature of militancy in Kashmir, the complex sentiments of local residents and the implications of recent policy shifts including the abrogation of Article 370. He also weighs in on the region’s prospects for peace and the preparedness of security forces during the upcoming Amarnath Yatra.

Has there been a gradual shift in the form of terrorism in Kashmir?

Yes, there has been a marked transformation in the nature of terrorism in Kashmir. Prior to 1995, militancy was largely homegrown, involving groups such as the Jammu and Kashmir Liberation Front (JKLF) and Hizbul Mujahideen. Foreign militants, particularly from Afghanistan, were largely absent. However, the post-1995 period witnessed a significant influx of foreign fighters, many of them battle-hardened veterans of other conflicts. Pakistan began to send trained army personnel across the Line of Control to orchestrate militant operations. In a more brazen move, it even released convicted criminals from its jails and funnelled them into militant training camps with the explicit purpose of destabilising India.


The roots of this cross-border radicalisation can be traced to the Soviet–Afghan War from December 1979 to February 1989, which left a large reservoir of armed jihadists in the region. Pakistan’s North-West Frontier Province became a logistical hub for the Afghan resistance, aided by the Deobandi clergy and institutions such as the Darul Uloom Haqqania, which offered ideological and operational support. Muslim countries in the Middle East sent thousands of volunteer fighters known as ‘Afghan Arabs’ who sought to wage jihad against the atheist Soviet occupiers. Among them was a young Saudi, Osama bin Laden, whose band of fighters would later morph into al-Qaeda.


These fighters did not simply vanish after the war ended; many were redirected to other theatres of Islamist militancy, including Kashmir. Over time, Kashmir became a fertile ground for this new breed of externally sponsored terror. The defeat of Pakistan’s forces in the 1999 Kargil War only intensified its reliance on asymmetric warfare, with terror groups such as Lashkar-e-Taiba and Jaish-e-Mohammed receiving active patronage from the Pakistani military-intelligence establishment. This shift turned what had begun as a local insurgency into an entrenched proxy war, with devastating consequences for regional stability.

Has the outlook of local residents changed towards India?

Locals who care about progress, development and enhancement of their own standard of living, are very happy with India and the tourism industry. Yet, a segment remains deeply alienated, driven by religious radicalism. There are so many radical thinkers who reside there for whom religion is the most important point to be concerned about. There are some who are brainwashed every single day. Every Friday prayer and madrassas become platforms for constant brainwashing. That said, a lot of residents have started understanding the importance of tourism that brings employment generation and progress. So, perceptions among local residents remain mixed.

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What is the positive impact of abrogation of Article 370?

The abrogation of Article 370 has visibly brought about a huge positive impact. Earlier there were so many restrictions for the forces, law enforcement. For example, earlier there was no IPC, it was RPC. The biggest problem was that if we arrested anyone in Kashmir the person had to be jailed in Kashmir itself. That had several tricky repercussions. The removal of clause 31 (a) giving them a special identity also gave free hand for forces to enforce law. For example, any one arrested there need not be restricted in Kashmir, the person could face law anywhere in India. Take stone pelting, which was a daily occurrence in Kashmir. To add to our problem, those who were arrested were put in jails in Kashmir that had traitors managing everything. Jails formed a hub for them to hatch new conspiracies for further terror activities and it was a huge problem. After the scrapping of Article 370, these criminals could be shifted to other parts of India. Stone pelting incidents have completely stopped after that. Demonetization has also contributed a lot to control the flow of money offered to these anti-social elements. Law enforcement agencies have benefitted the most.


With March to May being peak tourist season ahead of the Amarnath Yatra, what challenges do security forces face?

Local hotel owners have been given instructions regarding restrictions on allowing tourism in certain areas. They do not follow these guidelines. That’s the biggest challenge. Army can’t be present everywhere. Hoteliers are advised to allow tourists only within a stipulated radius where forces are deployed. Notwithstanding the guidelines they have started operating tourism activities beyond those stipulated areas where security forces are not deployed. Same is the case with Baisaran meadows. Hoteliers went beyond the set boundaries and welcomed tourists in areas beyond the permitted radius which includes the forest surrounded Baisaran valley.

Should tourists cancel their plans to visit Kashmir over the next two months?

There is no need for panic or cancellation. The situation on the ground has stabilised. However, tourists are advised to exercise caution and ensure that the places on their itinerary fall within areas secured by security forces. The army cannot be present everywhere; it is therefore incumbent on visitors to avoid zones that are either prohibited or inadequately protected.


Is war or a military strike on Pakistan a viable solution?

Such decisions lie solely with the country’s leadership. Prime Minister Narendra Modi and senior policymakers are best placed to evaluate the options. The government has indicated that any response will be decisive and strategic. Citizens should trust in institutional decision-making rather than speculate or advocate for military action unilaterally. PM Modi has said that we will take an action which will be beyond the imagination of the terrorists and their sponsors. Our government is doing its job well and we must trust them.

Was India right in suspending the Indus Water Treaty?

Suspending the IWT was a befitting reply to Pakistan’s decision to refuse to abide by the Shimla agreement. The Shimla agreement prohibits unprovoked firing. However, notwithstanding that, Pakistani forces have started unprovoked firing at the LoC. So, India’s retaliation is justified in this situation.

Can peace be restored ever in valley?

In every terrorist action initiative always lies with the terrorist. The development of region plays a pivotal role in generating employment. A sustainable approach which includes multiple dimensions like political, economic, social and diplomatic is also a factor that plays in. Apart from this a popular government and public support working together will change the situation and restore peace in the valley.

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