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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.)

Mature Voters, Immature Parties

India’s electorate is maturing faster than its political class, leaving parties trapped in outdated assumptions about caste, freebies and grievance.

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Are political parties keeping pace with the citizens they seek to woo? As the dust settles after the National Democratic Alliance’s (NDA) emphatic win in Bihar, the familiar ritual of parties, pundits and psephologists rummaging through their usual toolkit of explanations has begun. The familiar debates and arguments of pro-incumbency or anti-incumbency, ‘labharthi’ (beneficiary) politics, caste arithmetic, the women’s vote and coalition mismanagement are being bandied about in television debates and opinion pages. While each provides some sliver of truth, none captures the whole picture. It seems India’s voters have outgrown the templates built for them.


Contradictory Outcomes

The post-election discourse tends to treat each contest as a rerun of the last, as though the electorate were a static entity nudged into different outcomes only by freebies, factional quarrels or atmospheric emotion. But such explanations, however convenient, fail to explain why many of the same variables like caste alignments, welfare schemes and incumbency dynamics produce contradictory outcomes over time. The same voters who dutifully elected Jawaharlal Nehru and Indira Gandhi repeatedly also tossed their party out in later decades. States long ruled by heavyweights such as Jyoti Basu, Naveen Patnaik or Prakash Singh Badal have still witnessed dramatic swings within years or months between parliamentary and assembly elections.


If the familiar factors remain constant but behaviour changes, then the cause must lie not in the inputs, but in the voters themselves.


The comforting notion that elections turn on instant gratifications also frays under scrutiny. India has always seen forms of state patronage that resemble today’s “freebies.” Rajiv Gandhi’s reforms, from telecom to computerisation, created millions of upwardly mobile beneficiaries. Yet the Congress failed to convert those ‘labharthis’ into lasting political loyalty. Two decades of globalisation coincided with the party’s sharp decline and the Bharatiya Janata Party’s ascent to a commanding national majority in 2014. Welfare, clearly, is no automatic pathway to power.


Astute Electorate

Today’s electorate seems more inclined to judge full-term performance than to be distracted by episodic outrage. The BJP’s unexpected losses in Ayodhya, barely four months after the consecration of the Ram temple, showed that religious spectacle is no substitute for governance. The opposition’s fixation on EVM manipulation and errors in electoral rolls likewise failed to dent public confidence. Voters appeared to take the matter in stride: lists will never be perfect; democracy cannot hinge on clerical accuracy. When polling day passed without incident and all agents of all parties certified the process, the conspiracy theories fell flat.


Similarly, issues such as unemployment, inflation and inequality - perennial sources of discontent - did not generate a uniform anti-incumbent wave. Voters weighed the credibility of those complaining against their record when in office. To blame the ruling party for every economic stress while offering little proof of one’s own competence is no longer sufficient. The electorate is developing an ear for selective indignation.


Behind this shift lies a transformation both simple and profound: information. With the internet in every pocket, even modest households now inhabit the same news universe as the urban elite. Awareness of national and global trends reshapes aspirations and raises expectations, but also roots them in realism. The voter asking “What’s in it for me?” is not merely seeking material favour. Youth and women, in particular, look for governments that deliver, not paternalistically dispense. The old ‘Maa-baap sarkar’ has lost its hold.


Caste matters, but its emotional grip is loosening as its functional utility declines. Voters now recognise that dynastic politics, still common across India, is the most exclusionary form of the game. Sharing a surname with a ruling family yields little beyond symbolism. Many have begun to distinguish between identity-based appeals and actual material outcomes. That shift has exposed hollow claims of representation that once reliably mobilised blocs.


A deeper insight is taking hold as well. Voters increasingly see political parties as entities with their own interests. They have grasped that parties professing to champion the poor have little incentive to eliminate poverty if doing so erodes their support base. Likewise, parties thought to represent the affluent have every reason to expand beyond their original constituencies. This convergence of self-interest—once obscured by ideology—now sits in plain sight.


It explains why voters in poorer constituencies no longer hesitate to support a party derided as a “suit-boot ki sarkar.” If the perceived incentive structures of political actors align with public aspirations of growth, stability and opportunity, then the old caricatures matter less.


All this suggests that Indian voters are making braver, clearer choices than the political class credits them with. They are breaking stereotypes, sifting through competing claims, and judging performance across entire terms rather than on the basis of last-minute theatrics. The electorate does not appear to be polarised; the parties are.


For analysts, the implications are uncomfortable. Relying on decades-old frameworks like caste first, freebies second, incumbency third is misreading the present. India’s political marketplace is becoming more rational even as its politics remains shrill. The gap between the two grows with every election.


Political parties that fail to recognise this shift risk irrelevance. Those without their ear to the ground, or their feet firmly planted on it, may find the ground slipping away well before they realise it. The maturing electorate has already moved on. The question is whether its leaders can keep up.


(The writer works in the Information Technology sector. Views personal.)

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