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By:

Kaustubh Kale

10 September 2024 at 6:07:15 pm

Akshay Tritiya and Gold

As Akshay Tritiya arrives, gold once again takes centre stage in Indian households. For generations, buying gold on this auspicious day has been considered a symbol of prosperity, purity, and good fortune. It is not just a purchase. It is an emotion, a blessing, and a tradition passed from one generation to another. But beyond tradition, gold also carries an important financial lesson. Gold is not just jewellery. It is an asset. Gold During Uncertain Times Over the years, gold has proved its...

Akshay Tritiya and Gold

As Akshay Tritiya arrives, gold once again takes centre stage in Indian households. For generations, buying gold on this auspicious day has been considered a symbol of prosperity, purity, and good fortune. It is not just a purchase. It is an emotion, a blessing, and a tradition passed from one generation to another. But beyond tradition, gold also carries an important financial lesson. Gold is not just jewellery. It is an asset. Gold During Uncertain Times Over the years, gold has proved its worth not only during festivals, but also during uncertain times. Whenever the world faces wars, inflation, currency weakness, economic slowdown, or financial panic, investors across the globe look at gold as a safe haven. This is because gold has a unique quality. It is trusted across countries, cultures, and generations. It does not depend on the promise of one government, one company, or one currency. Why Gold Holds Value Unlike paper currency, gold cannot be printed endlessly. Unlike businesses, it does not depend on profits or management quality. Unlike real estate, it is globally accepted and easily valued. This is why gold continues to remain one of the oldest and most respected stores of value. It has survived centuries of change, economic cycles, wars, and financial crises. The Right Role in Your Portfolio That said, gold should not be treated as a shortcut to wealth creation. Equities and equity mutual funds still remain essential for long-term growth. Gold plays a different role. It brings balance, stability, and protection to your portfolio. When equity markets are volatile or global uncertainty rises, gold often provides comfort. A sensible allocation of around 10-20% to gold can help reduce overall portfolio risk.  So basically, while stocks and equity mutual funds play the lead role in your long-term financial goals, gold plays the supporting but essential role. Physical Gold Has Limitations However, the way you invest in gold matters. Buying physical gold during festivals may feel emotionally satisfying, but it comes with practical challenges. There are making charges, purity concerns, storage issues, risk of theft, and liquidity problems. A necklace may be beautiful, but you cannot easily sell only a small portion of it when you need money. Also, when gold is bought as jewellery, the investor often forgets to calculate the actual return after making charges and deductions. Smarter Ways to Invest This is where Gold Mutual Funds and Gold ETFs become useful. They allow you to invest in gold without worrying about lockers, purity, theft, or storage. You can invest flexible amounts, start SIPs, track value easily, and redeem conveniently when required. For investors who want gold as part of their financial plan, these options are far more practical than buying jewellery purely as an investment. Tradition with Financial Clarity Akshay Tritiya is a beautiful reminder that wealth should be built with faith, patience, and clarity. Buying gold is auspicious, but buying it in the right form is financially wise. This Akshay Tritiya, celebrate tradition - but also upgrade your financial thinking. Because true prosperity is not just about owning gold. It is about owning it smartly. (The writer is a Chartered Accountant and CFA (USA). Financial Advisor. Views personal. He could be reached on 9833133605.)

India’s Budget and the Road Ahead

Updated: Jan 29, 2025

Part 1:

As coalition politics reshapes governance and global tensions mount, India’s economy balances cautious optimism with emerging challenges in the run-up to FY 2024-25.

India’s Budget

January brings a wave of positivity and hope for everyone as the new year ushers in fresh resolutions and optimistic plans for the future. Financial planning takes centre stage during this time, both at an individual and policy level. The Central Government prepares for the upcoming Budget session of Parliament, where the General Budget is discussed and adopted, setting the economic tone for the country.


The anticipation around the budget creates excitement and expectation, as people look forward to potential benefits and improvements in various sectors. Recently, Budget Day has generated significant buzz and glamour in the media corridors. Ironically, it’s said that there is an exponential rise in the number of economists in the country around this time, which subsides within a few days. One day before the General Budget, the government tables the Economic Survey, an equally critical document that doesn't receive as much attention. The Economic Survey provides an analysis of the previous year's economic performance, including in-depth analysis of various indicators and concludes with estimates and recommendations for the upcoming year. The General Budget outlines the government’s plans for the upcoming year, including financial allocations and policy measures, and estimates the revenue and expenses of the Government of India. Fundamentally, the Economic Survey serves as the basic guideline document on which the government formulates its plans in the General Budget. It is imperative to study both documents together to gain a holistic view of the Indian economy.


Before delving into the actual numbers, it is essential to set the context. The previous two financial years saw a recovery from the pandemic shocks, with very high growth rates. FY 23-24 witnessed a GDP growth of 8.2 percent, and hence, at the advent of FY 24-25, positive sentiments were at their peak. The first quarter, being an election quarter with the model code of conduct in force, saw no major policy actions by the Government. Much to everyone’s surprise, the BJP lost its majority in the results, but the NDA together garnered the majority numbers. After ten years, the country again witnessed a coalition Government, which at this stage seems stable and strong. However, coalition governments face their own limitations, and there is a risk of delays in implementing critical reforms. The government had to change gears, and the country saw some critical bills referred to the Joint Parliamentary Committee for consideration and recommendation. Against this backdrop, the RBI projected a quarter-on-quarter average growth rate of 7.2 percent, while the Economic Survey report estimated growth within a range of 6.5 percent to 7 percent.


As discussed earlier, government spending had certain limitations, focusing only on ongoing projects, which resulted in sluggish growth. The country witnessed a GDP growth rate of 6.7 percent during Q1 of FY 24-25. Compared to previous general election quarters, it was the highest rate since Q1 FY 04-05. However, Q2 FY 25 fell short of the RBI's expectations, with a growth rate of 5.4 percent, attributed to rising prices and a sluggish increase in government capital expenditure. Corporate results for Q2 were also lacklustre, creating negative sentiments in the capital markets. Rising inflation concerns prompted the RBI to maintain policy interest rates. The RBI did aggressive intervention in the currency markets which resulted into a steady Dollar exchange rate. It was evident that due to the protectionist policy of RBI the rupee has been overvalued. Recently, the RBI has stopped active intervention, and the Rupee has started depreciating. While Q3 numbers are still awaited, it is projected that Q3 will witness a bounce back in economic activity, mainly driven by the festive season.


Globally, tensions flared as the Israel-Hamas conflict escalated, with Israel launching attacks on Hezbollah in Lebanon and Iran directly confronting Israel. Despite the Middle East volatility, crude oil prices remained relatively stable, and the Russia-Ukraine war had minimal impact on India. Meanwhile, Donald Trump’s aggressive campaign for a return to power stirred global unease, promising a stronger ‘America First’ stance. Biden's tightened sanctions on Russia will disproportionately affect nations purchasing Russian crude. Combined with rising oil prices and a depreciating rupee, these factors are expected to strain India's economy in Q4, with inflation looming. The government's foreign policies, it seems, will be tested more than its economic strategies.


(The author is a Chartered Accountant and works at Authomotive Division of Mahindra and Mahindra Limited. Views personal.)

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