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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.)

The Hidden Cost of Care: Biomedical Waste in Hospitals

Every hospital admission, no matter how small, generates waste. As India’s healthcare sector grows, so does the urgency to manage biomedical waste responsibly.

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In my last week‘s article, I discussed Sunita’s hospitalisation and the subsequent generation of biomedical waste. Her treatment involved intravenous administration of drugs. So a plastic IV set was used. After the procedure was complete, the IV set was discarded in the trash bin. The drugs worked, and she was discharged from the hospital in a couple of days.


However, if she had had further complications and if surgery were to be performed, much more waste would be generated. Sunita is just a representative example. Just like her, whenever any patient is admitted to the hospital for treatment, waste generation begins.


The type and the volume of waste generated depend on the nature of the treatment prescribed by the concerned doctors. However, the quantity of waste also relies on the growth of the healthcare sector.


So, let us first review this sector.


In India, the healthcare sector has become one of the largest sectors, both in terms of revenue and employment. As of FY24, this sector has employed 7.5 million people. In the current year, the CAGR (Compound Annual Growth Rate) is expected to rise to 22.5 per cent, up from 17 per cent in 2022.


The government aims to develop India as a global healthcare hub. The Indian healthcare market, which was valued at US$ 110 billion in FY16, is now projected to reach US$ 638 billion by FY25. India’s public expenditure on healthcare is expected to be 1.9 per cent of GDP in FY26, compared to 2.5 per cent in FY25, as per the Economic Survey 2024-25.


The sector is witnessing unprecedented growth. Private equity and venture capital investments surpassed US$ 1 billion in the first five months of FY24, marking a 220 per cent increase from the previous year.


India benefits from the availability of a large pool of well-trained medical professionals. This sector is anticipated to grow further, creating over 6.3 million additional jobs by 2030.


The government has allocated Rs. 99,858 crore (US$ 11.50 billion) to the healthcare sector in the Union Budget 2025–26. This allocation is meant for the development, maintenance, and enhancement of the country’s healthcare system. It reflects a 9.78 per cent increase from the previous allocation of Rs. 90,958 crore (US$ 10.47 billion) in FY25. To boost the country’s healthcare infrastructure, the Indian government is planning to introduce a credit incentive programme worth Rs 50,000 crores (US$ 6.8 billion).


Several factors are driving this growth, including rising income levels, an aging population, growing health awareness, and changing attitudes toward preventive healthcare.


There is also a significant increase in medical tourism. The lower cost of medical services in India attracts patients from around the world. To promote medical tourism, the government is extending the e-medical visa facility to citizens of 156 countries.


Moreover, India has emerged as a hub for R&D activities for international players due to the relatively low cost of clinical research.


Growing health awareness, precautionary treatments, and improved diagnostics are also leading to increased hospitalisations.


While we, the citizens and the government, should feel proud of the growth and revenue in the healthcare sector, we must not ignore the rising quantity of biomedical waste it generates.


More on this in my next article.

Until then, have a good weekend.

(Source: IBEF-India Brand Equity Foundation)


(The writer is an environmentalist.)

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