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By:

C.S. Krishnamurthy

21 June 2025 at 2:15:51 pm

Risk Refines Returns

An anxious investor entered his adviser’s office, clutching a file of stock charts. He was convinced he had found the perfect moment to enter the market. His plan was to wait for the precise dip, jump in, make quick gains and exit smartly. The adviser smiled gently, the way a teacher smiles at a student who thinks the syllabus ends with the first chapter, and began narrating a small tale that has stayed with me for long. He spoke of two farmers. One sowed seeds as the monsoon clouds gathered,...

Risk Refines Returns

An anxious investor entered his adviser’s office, clutching a file of stock charts. He was convinced he had found the perfect moment to enter the market. His plan was to wait for the precise dip, jump in, make quick gains and exit smartly. The adviser smiled gently, the way a teacher smiles at a student who thinks the syllabus ends with the first chapter, and began narrating a small tale that has stayed with me for long. He spoke of two farmers. One sowed seeds as the monsoon clouds gathered, tended the soil, and trusted sun, rain, and time. The other waited on a hilltop for the perfect cloud, believing precision mattered more than action. He kept climbing, analysing patterns. When the rains finally came, the first had green shoots breaking the earth. The second had only reasons. The adviser paused and said markets behave similarly: prepare early, stay invested, and let time do the real work. This simple story captures a truth that investors often forget. Most people desire higher returns, but very few want the risk that accompanies those returns. In wealth management, the principle remains constant across decades: high return requires high risk, low risk brings low return. What separates successful investors from frustrated ones is not luck or timing, but the ability to align risk, return and time horizon with the purpose of money. Risk Realities Consider a parent whose child’s college fees are due next year. A rising equity market may look attractive, but it is the wrong choice for such near-term needs. Even a small correction can upset careful plans. Here, safety matters more than growth because the goal is fixed and non-negotiable. Now contrast this with a young professional in her twenties avoiding equity due to fear of volatility. Ironically, she takes the bigger risk. By shunning growth assets, she risks losing future purchasing power. For her, time is a powerful ally that cushions volatility and rewards patience. Wealth planning begins with understanding three elements. The first is risk capacity. This is the financial ability to take risk. It depends on income, savings, liabilities and, most importantly, time horizon. A thirty-year window offers room for market ups and downs. A one-year window does not. When capacity is misunderstood, investors either become too aggressive or unduly conservative. The second is risk attitude. This has nothing to do with spreadsheets, and everything to do with psychology. Some investors can see their portfolio fall twenty pc and continue sleeping peacefully. Others panic if their units fall two pc. Knowing one’s emotional bandwidth is vital. A perfect portfolio is useless if the investor abandons it during the first storm. Behavioural finance teaches us that panic selling, not market decline, destroyed long-term wealth. Balancing fear and greed matter. The third is investment need. This is often ignored because investors chase returns without asking what return is actually required to achieve their goals. If a goal needs nine pc annual growth, why chase fourteen pc with twice the risk. When all three elements align, portfolios stop being products and begin to act as strategic tools that move families closer to their life outcomes. Purpose Planning Remember, risk is not a bad word, nor an enemy to fear, but a knife to be handled wisely. In skilled hands, it slices food, and in a surgeon’s care, heals bodies with precision. In careless use, it wounds deeply. When aligned with goals and time, risk builds wealth. Long-term investing lies in respecting its sharp edge and using it with patience and discipline. In the end, the adviser reminded the anxious investor that the greatest financial risk is not volatility, but a portfolio that does not match its purpose. Timing the market might offer a few lucky victories, but time in the market builds lasting wealth. Seeds grow not because the farmer predicts rain, but because he plants them early and let nature work. That lesson holds for every investor. Goal setting, disciplined risk alignment and the patience to let compounding work turn uncertainties into opportunities. Wealth is not created by chasing returns, but by respecting time.  If you are ready to follow discipline in investment, risk can turn into opportunity. (The writer is a retired banker and author of ‘Money Does Matter.’ Views personal.)

India’s Rs. 1 Lakh Crore Science Bet

The bold RDI scheme to transform research funding signals India’s ambition to become a tech-driven developed nation by 2047.

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On July 1, the Union Cabinet approved the Research Development and Innovation (RDI) scheme, committing an unprecedented Rs. 1 lakh crore to transform India’s research and innovation landscape. This announcement marks a fundamental shift in how the country supports science and technology and comes at a time when India is implementing several measures to improve the ease of doing science. Together, these efforts promise to reshape the innovation ecosystem and define India’s trajectory toward becoming a developed nation by 2047, the centenary of its independence.


For decades, India’s scientific establishment has been primarily supported by public funding, with government laboratories and academic institutions at the forefront. This model, while yielding many successes, has often struggled to bridge the gap between scientific discovery and industrial deployment. Dubbed the ‘valley of death,’ this gap is where promising innovations fail to move beyond proof of concept due to limited risk capital, regulatory complexity, and insufficient private sector participation. The RDI scheme seeks to address this structural deficiency by targeting the financial and institutional barriers that have hindered private investment in science and technology.


At its core, the scheme introduces a dedicated Special Purpose Fund within the Anusandhan National Research Foundation (ANRF). This fund will serve as the financial backbone, distributing resources through selected second-level fund managers. The nature of this financing is both flexible and ambitious. It will include long-term concessional loans, in some cases at nil interest and equity support, particularly for startups working in high-risk, high-reward sectors. This marks a departure from the traditional grant-based approach and reflects a more sophisticated understanding that scientific and technological innovation, especially in deep-tech areas, requires patient capital that tolerates risk and delayed returns.


The scheme focuses on sunrise sectors and domains of strategic national importance including emerging areas like quantum technologies, semiconductors, clean energy, biotechnology, artificial intelligence and space applications. Emphasis will be on projects with higher technology readiness levels, those close to deployment or commercialization. This is where India’s innovation pipeline has often faltered. The scheme aims to address this by supporting translational research and enabling the private sector to become a full partner in India’s innovation journey.


It also provides for the acquisition of technologies that are of high strategic importance. In a global environment increasingly shaped by technological competition and disrupted supply chains, this is a prudent and necessary step. It underscores the recognition that technological capability is as central to national security as military strength or economic resilience. The scheme thus aligns with India’s broader goal of strategic autonomy in critical domains.


What makes it different is its governance structure. The governing board of ANRF, chaired by the Prime Minister, will provide strategic direction. The executive council will oversee the operational guidelines and an empowered group of secretaries led by the cabinet secretary will make key decisions regarding sectors, projects and fund managers. The Department of Science and Technology will act as the nodal agency. This multi-tiered structure brings strategic leadership and administrative efficiency into the same framework.


In parallel, the scheme envisions the creation of a Deep-Tech Fund of Funds. This addresses a long-standing need in India’s startup ecosystem. While the country has earned a reputation for its vibrant startup culture, deep-tech ventures rooted in fundamental science or engineering often struggle to raise capital due to long gestation periods and technical risk. Traditional venture capital has generally steered clear of such investments. By offering equity and quasi-equity financing, the RDI scheme could create a more favourable investment climate for frontier technologies and strengthen India’s presence in critical innovation domains.


This initiative must also be viewed alongside recent policy reforms aimed at improving the ease of doing science. These include simplified procurement norms, faster fund disbursal, streamlined project approvals and improved access to global collaborations and datasets. Together with the RDI scheme, these reforms create a more supportive and enabling environment for scientists and entrepreneurs. They signal a growing recognition that science is not merely a public good but a driver of economic and strategic power.


Equally important is the broader societal message this scheme conveys. It positions research and innovation not as auxiliary activities, but as central to national development. It reflects a new social contract in which the state, industry and academia co-invest in a shared scientific future. However, this also brings a responsibility to ensure that public funds are used efficiently, transparently and with measurable outcomes. The risk of inefficiency or misuse must be addressed through rigorous monitoring, competitive evaluation and publicly disclosed performance metrics.


If implemented effectively, the RDI scheme could generate far-reaching economic and social benefits, helping to create high-quality jobs, reduce import dependence in critical sectors and enhance India’s ability to respond to complex challenges. It can also inspire talented researchers to stay in India, foster global collaborations on equitable terms, and nurture a new generation of science-based entrepreneurs.


As India looks ahead to 2047 with the vision of becoming a developed country, science and innovation must occupy a central role. Infrastructure, governance and welfare will remain crucial, but it is technology that will determine India’s ability to compete, lead and contribute meaningfully in the global arena. The RDI is a signal of strategic intent and an investment in India’s future as a knowledge-driven, self-reliant and globally respected nation.


(The writer is former Director, Agharkar Research Institute, Pune and a Visiting Professor at the IIT Bombay. Views personal)

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