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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.)

Himalayan Upheaval: Nepal’s Generation Z Revolution and the Great Power Game

Protests against social media restrictions in Nepal have swiftly morphed into a geopolitical maelstrom, threatening the balance of power in South Asia.

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Earlier this month, Nepal’s capital, Kathmandu, transformed into the scene of one of the most dramatic political upheavals in recent South Asian history. A mass uprising, led primarily by the ‘Generation Z’ toppled Prime Minister KP Sharma Oli’s government in a matter of days. The immediate spark was a ban on social media imposed by Oli’s administration - a move widely perceived by the youth as an assault on their freedom of expression. Yet beneath the surface, the rebellion exposed far deeper fault lines of endemic corruption, crushing unemployment, political stagnation and the complex tug-of-war between global powers vying for influence in the Himalayan nation.


The week commenced ominously with Oli’s resignation that was followed by a brutal crackdown that left at least 19 young protesters dead. This set-off a cycle of violence which saw irate protestors vandalizing the residences of former prime ministers Pushpa Kamal Dahal (known as ‘Prachanda’) and Sher Bahadur Deuba. The seat of Nepal’s bureaucracy, Singha Darbar, suffered arson attacks. Even ultra-sacred sites like the famed Pashupatinath Temple narrowly escaped desecration. Across the capital and other districts, mobs rampaged through official buildings, burning, pillaging and humiliating the political class they once tolerated.


Amid this chaos, some new (and controversial) political figures are beginning to emerge. Kathmandu’s rapper-turned-mayor, Balendra Shah, along with activist Sudan Gurung and controversial former deputy prime minister Rabi Lamichhane, are being touted as possible leaders of a nascent interim government. These figures, seen by some analysts as US-aligned, contrast sharply with Oli himself, who was widely viewed as a Chinese protégé. The stakes for regional geopolitics have rarely been higher.


History of Instability

Nepal’s political instability is hardly new. Since the abolition of its monarchy in 2008, the country has cycled through no fewer than 14 prime ministers in 17 years. Governance has been marked by nepotism, corruption, and incoherence. The political class is widely seen as power-hungry, indifferent to the struggles of a populace where, on average, eight lakh young Nepalis leave annually to find blue-collar work abroad. Many depart not seeking middle-class comfort, but merely to escape poverty.


For years, the Oli government had earned a reputation for authoritarianism. The decision to impose a draconian social media ban ostensibly to curb ‘misinformation’ was widely seen as the last straw for a disenfranchised youth, for whom digital platforms are not just entertainment but a primary mode of expression and connection.


However, in wake of the recent geopolitical tectonic shifts in South Asia, the swiftness and scale of the Nepal protests have led many observers to suspect they were not entirely organic. The sudden mobilisation of disparate groups and the financial resources required for such a campaign coupled with the precision of its execution all bear hallmarks of deeper orchestration.


Given the recent regime-change operation in Bangladesh, where protests ostensibly over quota policies morphed into widespread calls for the ouster of Sheikh Hasina, a foreign hand (read the United States) is widely being perceived as being behind the Nepal protests.


Geopolitical Chessboard

Nepal occupies a uniquely sensitive position in South Asia. Nestled between China and India, it has long been a site of strategic contestation. Traditionally, India has viewed Nepal as part of its natural sphere of influence, given deep cultural, economic, and historical ties. Yet the relationship has been far from frictionless. Memories of the 2015 unofficial blockade, widely blamed on New Delhi, linger in Kathmandu’s collective memory, fuelling latent anti-Indian sentiment. Against this backdrop, political leaders have rarely dared publicly profess friendliness toward India, preferring instead to cosy up to China.


Prime Minister Oli embodied this tilt. His China-friendly stance and pro-Beijing rhetoric, particularly during the Belt and Road Initiative’s expansion, further complicated India-Nepal relations. In contrast, the emerging figures now being promoted - Shah, Lamichhane and Gurung - are known for their pro-US leanings and are vocally anti-India. Shah has publicly displayed maps of ‘Akhand Nepal’ that encompass the Indian territories of Himachal Pradesh and Uttarakhand.


This shift carries serious strategic implications. Should an openly hostile regime take power, India would be left sandwiched between two adversarial neighbours - Bangladesh to the south, under an increasingly antagonistic government, and now Nepal to the north.


External Influence

Beyond power politics, the role of soft power and covert influence is crucial to understanding Nepal’s current turmoil. Since the devastating earthquake in 2015, American Christian missionary organisations have expanded rapidly in Nepal, often unregulated, fostering a sizeable evangelical Christian population. Countless US-funded NGOs have proliferated, with deep involvement in education, media, and civil society activism.


Social media too plays a vital role. Reports suggest that algorithms on platforms such as Facebook and Instagram amplified certain posts, turning obscure influencers into viral sensations overnight. Videos exposing the lavish lifestyles of political elites’ offspring, the ‘NEPO kids’ spread like wildfire, stoking public anger. Such viral phenomena are rarely organic, raising questions about deliberate interference.


Even more striking was the storming of Nakhu prison, where Rabi Lamichhane was freed along with some 1,500 other inmates in a manoeuvre that smacks of a calculated political coup rather than a spontaneous uprising.


Adding to the complexity is the Maoist factor. Disillusioned cadres from the Nepal Maoist Party, bitter over the corruption within their ranks, reportedly participated in setting fire to state institutions, and in the more egregious attempt to enter Pashupatinath Temple. Given Nepal’s deeply religious society, the desecration attempt stands out as an act designed to discredit the protesters’ democratic claims, pointing instead to factional infighting.


Then there is the monarchy. The pro-monarchist movement, long thought dormant since Nepal’s transition to a republic, has resurfaced. Rumours swirl that King Gyanendra may have lent tacit support to the protests. While unconfirmed, these claims underscore the multifaceted nature of the uprising.


India’s Dilemma

For India, the unfolding drama is a diplomatic minefield. The default reaction might be to intervene, given historic ties and shared borders. Yet, overt involvement now would be politically disastrous. Any perception of interference would feed the anti-India narrative and play directly into the hands of those seeking to weaken Indian influence. The prudent course is to maintain a hands-off approach.


Indian policymakers must remain alert to the danger of hostile regimes emerging in its backyard. The thin 23-kilometre Siliguri Corridor, which connects India’s northeastern states to the rest of the country, becomes all the more vulnerable if Nepal turns belligerent. The spectre of another anti-Indian neighbour, alongside an increasingly adversarial Bangladesh, threatens New Delhi’s strategic interests.


At home, India must also be vigilant of similar tactics. Protests such as the farmers’ agitation of recent years have sometimes exhibited the hallmarks of regime-change playbooks.


The situation in Nepal remains fluid. The army now governs under curfew, and the political vacuum invites all manner of actors to step in. Whether the interim government will be led by a genuinely reformist figure or by individuals serving external agendas is yet to be seen.


What is certain is that Nepal is not merely experiencing a youthful revolt against authoritarianism and corruption but is in the throes of a larger geopolitical ‘Great Game.’

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