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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.)

Highways to Progress or Dead Ends?

Updated: Mar 20

Despite ambitious plans and soaring budgets, India’s road infrastructure still faces hurdles of safety, sustainability and sluggish execution.

India’s road infrastructure

John F. Kennedy once remarked, “America’s roads are not good because America is rich. America is rich because of its good roads.” The sentiment rings true for India, a nation that has bet heavily on highways as the backbone of its economic future.


India boasts the second-largest road network in the world, spanning 63.45 lakh kilometers. Yet, despite constituting just two percent of this vast web, National Highways (NH) bear the brunt of the load, carrying a staggering 33 percent of the country’s road traffic. Over the past decade, the NH network has grown from 91,287 km in 2014 to 1,46,195 km in 2024. With a road density of 1.94 km per square km, India now surpasses economic giants like the United States, Russia, and China in connectivity.


The Ministry of Road Transport and Highways oversees this network, except in the rugged, strategic borderlands managed by the Border Roads Organisation under the Defence Ministry. The numbers alone indicate an impressive commitment: in the fiscal year 2025-26, the ministry’s budget allocation stands at Rs. 2.87 trillion, a modest increase from Rs. 2.8 trillion (revised) in FY 2024-25 and Rs. 2.75 trillion in FY 2023-24. More striking, however, is the efficiency of fund utilization. Since 2015-16, the ministry has met 90 percent of its ambitious targets for NH development.


A significant portion of this expansion is driven by the National Highway Authority of India (NHAI), an autonomous body tasked with executing high-impact projects. Currently, its primary focus is the Bharatmala Project, a massive initiative launched in 2017 with the aim of extending the NH network by 34,800 km by 2022. Yet, as of December 2024, only 18,714 km had been completed, underscoring the gap between aspiration and execution.


Beyond NHAI, Rs. 1.2 trillion has been earmarked for expressways, multi-laning projects, and connectivity enhancements in left-wing extremism-affected areas. Expressway development is particularly ambitious. Meanwhile, multi-laning initiatives have kept pace, averaging 12,000 km annually, while 96 percent of the planned 6,014 km of roads in conflict-ridden regions have been completed.


Funding for these projects is drawn from four non-lapsable reserves: the Central Road and Infrastructure Fund (CRIF), the Permanent Bridges Fee Fund (PBFF), the Monetisation of National Highways Fund (NHMF), and the National Investment Fund (NIF). For FY 2025-26, these pools collectively amount to Rs. 74,000 crores. The CRIF, sustained by a fuel cess, finances state-level projects; the PBFF, fed by toll revenues, supports bridge maintenance; the NIF, derived from disinvestment, channels resources into the northeastern states; and the NHMF, sourced from monetized highway projects, serves as a crucial mechanism for repaying NHAI’s Rs. 3.35 trillion debt, most of it linked to Bharatmala. Under the National Monetisation Pipeline launched in 2021-22, the ministry aimed to raise Rs. 1.6 trillion by 2024-25, with Rs. 1.1 trillion already secured by 2023-24.


Despite robust investments, road maintenance remains a glaring challenge. In 2018, Niti Aayog recommended allocating at least 10 percent of infrastructure budgets for upkeep, yet the ministry continues to set aside a mere 2 percent. A parliamentary Standing Committee has deemed this allocation grossly insufficient, reflecting public frustration over deteriorating roads while officials scramble for sustainable maintenance solutions.


Road safety presents an equally pressing concern. Although road accidents declined from 4.90 lakh in 2014 to 4.61 lakh in 2024, fatalities have paradoxically risen, from 28 percent to 37 percent. The reasons range from lax traffic discipline to insufficient enforcement. Alarmingly, despite its gravity, road safety receives less than one percent of the total budget, with funds often going underutilized.


India’s highways pose an environmental challenge, with road transport handling 77 percent of logistics and diesel-powered freight contributing 12 percent of carbon emissions. Despite potential savings - 50 percent in fuel costs and 20 percent in logistics - EV adoption remains slow, requiring policy shifts, incentives, and infrastructure support for real progress.


At its core, India's road revolution is a testament to economic ambition. The expanding highway network has catalysed industrial growth, facilitated trade, and brought once-remote regions into the mainstream. Yet, to unlock its full potential, the country must address critical bottlenecks: regulatory complexities must be streamlined, road safety must take priority, and environmental concerns must be meaningfully integrated into infrastructure planning. Perhaps most crucially, the integration of highways with high-speed rail and freight corridors could create a seamless, multimodal transport network - one that truly supports India’s aspirations for the future.


(The author is a Chartered Accountant with a leading company in Mumbai. Views personal.)

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