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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.)

Gearing Up

The ruling BJP-led Mahayuti is girding itself for a decisive display ahead of the forthcoming civic elections across Maharashtra by using infrastructure as both a sword and a shield. Across Mumbai and its satellite cities, the state government has unveiled a raft of initiatives that promise to reshape urban life while consolidating political advantage. Chief among them is the Slum Cluster Redevelopment Scheme (SCRS), a sweeping plan to transform Mumbai’s sprawling shanties and decayed structures into modern, sustainable housing clusters.


The SCRS targets contiguous land parcels of at least 50 acres, where slums account for a majority of the area. Implementation rests with the Brihanmumbai Slum Rehabilitation Authority (BSRA), which will either lead the redevelopment directly, enter joint ventures, or invite private developers via tender. The scheme provides incentives for larger landowners and integrates slums within environmentally sensitive zones, with vacated land earmarked for public facilities and retail projects. Flexibilities in building density like allowing the Floor Space Index (FSI) to exceed standard limits signal the government’s willingness to accommodate displaced residents while promoting real estate investment.


Infrastructure is being deployed as a political instrument. The inauguration of the Navi Mumbai International Airport (NMIA), slated to open commercially in December is a prime example of this strategy. The NMIA is designed as India’s first fully digital airport, boasting AI-enabled terminals, online baggage handling, and integrated multimodal transport links. With a projected capacity of 20 million passengers initially, and 155 million at full build-out, the airport promises to generate over two lakh jobs across aviation, logistics, IT, hospitality, and real estate. Such mega-projects are expected to reinforce the image of the Mahayuti as a government capable of delivering large-scale modernisation.


Other policy decisions complement these high-profile projects. The Urban Wastewater Treatment and Reuse Policy 2025 seeks to embed circular economy principles in 424 urban local bodies, treating and reusing water for industry and irrigation. The Maharashtra Gem & Jewellery Policy 2025 aims to attract Rs. 1 lakh crore in investment and create half a million jobs, while doubling exports in the sector over the next decade. Urban mobility will see a green push through the allocation of land for an e-bus depot at Amravati. Even traditional sectors such as textiles benefit, with subsidies and regulatory support for private spinning mills, aligning industry incentives with electoral messaging. By delivering visible change in housing, transport, employment, and urban infrastructure, the alliance, especially the BJP, seeks to neutralise opposition narratives and cultivate loyalty among a politically crucial urban electorate.


That said, ambitious infrastructure projects often take years to materialise, leaving the electorate to judge political intent rather than tangible results. Nonetheless, elections will be fought on the ground of bricks and mortar as much as on ideology. The BJP certainly visualises itself as the architect of the city’s future. If infrastructure can indeed translate into votes, Maharashtra’s civic polls may offer a masterclass in the politics of urban spectacle.


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