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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.)

Sugar price to play a role in most of Western Maharashtra

Delay in Minimum Support Price by Central Government poses risks for sugar industry; political fallout anticipated


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Kolhapur: With the onset of November 1, the sugar season commences across India, triggering the perennial battle over sugarcane prices and creating a tense atmosphere during Diwali. In recent years, the central government has tied the sugar industry to ethanol economics, which had temporarily alleviated disputes over sugarcane prices by bolstering sugar exports. However, the ongoing delay in announcing an increase in the minimum support price (MSP) for sugar has escalated tensions between sugar factory owners and farmers.


If the government fails to act promptly, this conflict is expected to intensify, with significant implications for the upcoming assembly elections in western Maharashtra region, the heart of the sugar industry.

The politics in western Maharashtra is directly linked to the sugar industry. The suage barons in the districts of Kolhapur, Sangli, Solapur, Satara, Pune and Ahmednagar are the dominant politicians at the local level.


To address instability in the sugar sector, the Modi government has implemented several initiatives, including support for ethanol production and low-interest seed capital. While these measures have been beneficial, the critical issue remains the minimum support price for sugar. The MSP is essential for ensuring stability in the sugar market. Currently, the MSP for sugarcane is set, but there is no corresponding protection for sugar prices, leading to a distorted economic landscape. In 2019, the government established a minimum support price of 3,100 per quintal for sugar, enforcing restrictions on sales below this threshold. While this was welcomed by the industry, there has been no increase in the MSP in the past six years. Meanwhile, the fair and remunerative price (FRP) for sugarcane has seen annual hikes, further destabilising the industry.


As the new sugar season approaches, farmers’ organisations are gearing up for negotiations. The Swabhimani Shetkari Sanghatana, led by former MP Raju Shetti, is set to hold its annual sugarcane conference to outline demands. This year, farmers are seeking ₹3,750 per ton for sugarcane. Despite a surge in sugar exports and ethanol production over the last four years, last year’s restrictions on exports and ethanol output have dampened prospects, increasing the urgency for a rise in the MSP for sugar.

While the central government has tentatively acknowledged these demands, discussions between representatives of sugar factory owners and government officials have yet to yield concrete decisions.

The Western India Sugarcane Growers Association (WISMA) has expressed its inability to commence the season amidst this indecision. This delay threatens the economic viability of the sugar industry and could further inflame tensions between factory owners and farmers, with serious political ramifications on the horizon.

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