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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.)

Race for supremacy

Fadnavis is strong on political front, facing difficulties in administrative push

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Mumbai: For Chief Minister Devendra Fadnavis, this year has not just been about reclaiming his administrative legacy; it has been about proving that the BJP remains the indispensable anchor of stability, especially as the party navigates the choppier waters of coalition politics in New Delhi.


The opposition parties in the state, though broken by the 2024 defeat, have had a field day. Throughout the past year, they adopted a “shoot and scoot” strategy, levelling corruption charges against ministers with alarming frequency. While many charges haven’t stuck, the sheer volume has kept the government on the defensive. The MVA’s narrative has found some traction in rural pockets, where agrarian distress remains a sore point despite the government’s new loan restructuring schemes.


If Fadnavis’ first term (2014-2019) is remembered for the Metro and the Samruddhi Mahamarg, his third term is shaping up to be defined by direct benefit transfers and social security. Sensing the rural distress that cost the ruling alliance dearly in the 2024 Lok Sabha polls, Fadnavis shifted gears immediately upon taking charge last December.


Flagship Scheme

The flagship ‘Ladki Bahin Yojana’, initially launched as a poll promise, saw a massive expansion this year. The monthly aid was not only regularized but the coverage was expanded to include women from slightly higher income brackets, effectively turning a welfare scheme into a universal social dividend for Maharashtra’s women.


Government’s decision to offer complete electricity bill waivers for agricultural pumps up to 7.5 HP came as a massive relief to the Vidarbha and Marathwada belts. Coupled with the aggressive implementation of the Mahatma Jyotirao Phule Jan Arogya Yojana—which now covers medical expenses up to Rs 5 lakh for every family regardless of income criteria—the Fadnavis administration has successfully created a “welfare safety net” that the opposition has found difficult to puncture.


Undisputed Heavyweight

One year in, Devendra Fadnavis remains Maharashtra’s undisputed political heavyweight. His administrative grip is firm, and his vision for a trillion-dollar state economy is back on track. Yet, the political capital required to maintain this speed is higher than ever.


In 2014, he was a man in a hurry, leading from the front. In 2025, he is a man in a hurry, but one who must constantly check his rearview mirror to ensure his partners are still with him—and not dragging the wheels. The coming year, with the local body polls as the battleground, will decide if his administrative reforms can indeed survive the corrosive nature of coalition politics.


Shaky Delhi

The political significance of this stability extends far beyond the state’s borders. With the BJP at the Centre grappling with the constraints of a coalition government and a reduced mandate since the 2024 general elections, Maharashtra has emerged as the party’s most critical fortress.


On the backdrop of fractured mandate in Lok Sabha elections followed by the sudden exit of Vice President Jagdeep Dhankhar, Fadnavis has played the role of the reliable lieutenant perfectly. By insulating the state’s economy from political tremors and ensuring Mumbai remains an investment magnet – attracting over 40 per cent of India’s total FDI in 2025 – he has also provided the Centre with the economic narrative it desperately needs to counter the “slowdown” critiques.


Road Ahead

As the state gears up for the impending Local Body elections, the Fadnavis government faces its true litmus test. The narrative is set: on one side, a slew of populist decisions—free healthcare, direct cash transfers, and accelerated slum redevelopment in Mumbai—aimed at the common voter. On the other, the undeniable friction of a three-headed coalition and the opposition’s charges of corruption.


For now, Devendra Fadnavis has managed to keep the ship steady and the passengers relatively happy.


The Report Card

Pass

1. Push for investments

2. Focus on infrastructure

3. Reduced electricity rate

4. Welfare schemes


Fail

1. Failure in maintaining social harmony

2. Lack of tough action against corruption

3. Internal friction in ruling alliance

4. Rising law and order issues



“The government is busy patting its own back. They sit in five-star hotels and narrate their achievements, but people have received nothing except disappointment.”

Vijay Wadettiwar, Leader, Congress

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