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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.)

India’s Multi-Alignment Moment

As Washington demands choices, India refuses to abandon pragmatism in its foreign policy balancing act.

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India’s foreign policy has evolved from Pandit Nehru’s idealistic non-alignment to a pragmatic multi-alignment approach, reflecting the complexities of today’s multipolar world. Engaging simultaneously with the U.S., Russia, and China, India seeks to preserve strategic autonomy while advancing its territorial integrity, economic growth, and regional leadership. Donald Trump’s decision to impose 50 percent tariffs on Indian exports has upset this delicate balance. China, despite being a key U.S. rival, faced only 30 percent tariffs, underscoring how trade policy is increasingly driven by geopolitics and challenging India’s autonomy in the face of Washington’s transactional stance.


Between 1947 and 1964, Nehru shaped India’s foreign policy around non-alignment, aiming to keep the country independent of Cold War blocs. Rooted in India’s colonial experience, this approach promoted peace, decolonization, and global cooperation, while allowing New Delhi to engage both superpowers and maintain strategic independence. Early Indo-Chinese diplomacy reflected optimism, captured by the slogan ‘Hindi Chini Bhai Bhai’ and the 1954 Panchsheel Agreement. Yet the 1962 border war shattered this hope. China’s swift military advance exposed India’s vulnerabilities, prompting a major reassessment of defence and foreign policy. Nehru’s idealism gave way to realism as India sought to protect its sovereignty.


Following the war, India’s socialist leanings aligned naturally with the Soviet Union, particularly as the U.S., focused on the Middle East, backed Pakistan for its strategic location. India found Moscow a more reliable partner to counterbalance U.S. influence. This partnership culminated in the 1971 Indo-Soviet Treaty of Peace, Friendship and Cooperation, vital during the Bangladesh Liberation War. Soviet diplomatic support and naval presence deterred U.S. intervention in the Bay of Bengal, allowing India to decisively defeat Pakistani forces and facilitate the birth of Bangladesh. Despite strengthening air and naval capabilities, India avoided stationing Soviet forces on its soil, preserving its strategic autonomy.


Throughout the Cold War, U.S. support for Pakistan strained Indo-American relations. Nixon’s deployment of the Seventh Fleet during the 1971 war exemplified this tension. India, backed by the USSR, resisted American pressure, embedding mistrust that would linger for decades. The collapse of the Soviet Union in 1991 forced another strategic pivot. India reduced reliance on Russia and bolstered ties with Washington, driven by its growing market, IT boom, and global diaspora. The 1998 nuclear tests invited U.S. sanctions, but diplomatic efforts by Prime Minister Vajpayee eased tensions. After 9/11, mutual strategic interests deepened the Indo-American partnership.


The 2008 Civil Nuclear Deal, brokered by Prime Minister Manmohan Singh and President George W. Bush, marked a turning point. It recognised India’s nuclear status and enabled cooperation despite its exclusion from the Non-Proliferation Treaty. The deal reshaped U.S. perceptions of India, positioning it as a key Indo-Pacific partner. Yet India maintained its strategic partnership with Russia. The 2018 S-400 missile deal, signed despite U.S. sanctions threats, reaffirmed New Delhi’s autonomy. Russia now supplies nearly 40 percent of India’s oil imports, saving billions annually.


Over the past two decades, India and China have balanced growing trade with strategic rivalry. China is India’s top trading partner, yet border disputes have strained bilateral ties. The 2017 Doklam standoff and the 2020 Galwan clash illustrated how security concerns can override economic cooperation. In response, India restricted Chinese investments and blocked apps. Nevertheless, diplomatic contacts continued. Wang Yi’s August 2025 visit and Modi-Xi talks at the SCO summit reflected efforts to manage tensions under U.S. pressure. Resumed border negotiations and confidence-building measures indicated a shared interest in avoiding escalation, though far from strategic alignment.


Operation Sindoor in May this year marked a decisive shift in India’s defence posture. Precision strikes deep into Pakistan dismantled terror infrastructure and challenged its nuclear deterrent doctrine. India showcased advanced capabilities, notably using the Russian S-400 system, and rejected U.S. mediation attempts. The operation also highlighted India’s evolving ties with Russia and reduced dependence on the U.S.


Experts view the recent U.S. tariffs as a response to India’s assertive multi-alignment stance. Washington’s discomfort stems from India’s independent foreign policy, its defence ties with Russia, and continued oil imports from Moscow. The move reflected U.S. pressure tactics designed to force India into choosing between autonomy and economic incentives. India responded with measured restraint, intensifying its outreach to other countries and trade blocs to diversify partnerships.


U.S. hostilities opened space for tactical India-China engagement. Recent diplomatic exchanges, such as Wang Yi’s visit and the SCO summit, focused on managing tensions, not strategic convergence. That said, the idea of a Russia–India–China axis within BRICS remains aspirational at best. While all three oppose Western dominance and support multipolarity, conflicting interests hinder deeper cooperation. India uses BRICS as a platform for balanced engagement, wary of China’s attempts to turn it into an anti-Western bloc.


India is countering U.S. tariffs through domestic measures such as tax cuts to boost demand and export incentives to support traders. Trade diversification via BRICS, the EU and relaxed Chinese restrictions offer tactical flexibility. Strengthening ties with Europe, Japan and other democracies helps avoid overdependence on any single power.


India aspires to emerge as an independent and influential pole in a multipolar global order. As supply chains diversify, it is well-positioned to lead the China+1 strategy. Long-term initiatives such as Atma-Nirbhar Bharat and Make in India should be fast-tracked to boost indigenous capabilities.


India’s foreign policy is now facing its most complex test since independence. The key challenge lies in maintaining coherence across partnerships while defending core interests. China remains unpredictable, but India cannot afford to alienate the U.S. Recent tensions are tied largely to Trump’s personal vulnerabilities, and with his term ending in 2028, India must keep diplomatic channels open. Relations with Russia remain anchored in pragmatism and historical trust, while China presents the most delicate test.


India’s success in translating economic and military strength into strategic autonomy will define its global role. As S. Jaishankar aptly put it, India must engage with the world as it is while shaping the world it wants.


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

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