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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.)

Two lakh deaths - but who cares? 

India’s lethal air has become so routine that even mass mortality now struggles to provoke political urgency.

 

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India’s national capital is choking as it always does, under a winter blanket of smog that has long ceased to shock. Delhi Chief Minister Rekha Gupta has responded by urging half the city’s office workforce to work from home - a palliative that only serves to starkly underscore the enduring helplessness of governments in tackling the poison in the air.


Delhi is not the only city which is battling deteriorating air quality; there are many Indian cities going through the environmental ordeal. Mumbai, Kanpur, Indore, Ghaziabad, Jaipur, Hapur and NOIDA are the other cities.


I vividly recall the Union Minister for Forest and Environment and Climate Change (MoEFCC), Prakash Javdekar who had boasted in Parliament that his ministry would tackle pollution quicker than what China did. Javdekar’s last stint as MoEFCC was in 2021. He was twice in charge of this key portfolio but pollution levels grew constantly year after year. His claims for NCR in 2019 remain on paper only.


Delhi’s thick air has been floating low for decades during which Congress, BJP and AAP ruled the historic city; they had all claimed to have addressed it while also blaming each other for the sake of optics. Meanwhile, Delhiites have been endlessly suffering smog, inhaling fine dust particles and facing vehicular pollution. Delhi has two crore citizens and a big floating population of neighbouring Rajasthan, UP, Punjab and Haryana daily, making the Indian capital clearly unliveable by any standard. Isn't it a national shame?


Beijing lesson

I visited Beijing in 2008, the year when the Summer Olympics were to be held in the Chinese capital. (Incidentally, the city is the only city which hosted summer and winter Olympics in the history of the games). The government there was much worried about its global image and had put in place everything possible to clear the skies before the athletes from across the world converged upon the ancient city in 2008. The winter games were held much later in 2022. The two Olympic Games within the space of 14 years display the seriousness and magnitude of efforts, as also Government’s genuine commitment towards the sportspersons and citizens alike. We can blame China for many things but can also learn a lot, if we wish to.


So, when BJP’s CM Gupta announces restricted hours of schools and reduction of traffic by permitting 50 percent staff to attend offices, one wonders what did the Union Environment Ministry do under Javdekar.


BJP inherited the challenge from Congress when Narendra Modi became the Prime Minister in 2014. Similarly, Rekha Gupta inherited air and river pollution from the AAP Government.


Like Javdekar, motor-mouth Arvind Kejriwal, too, had made umpteen promises about cleaning up the air but they were meant to make headlines more than combating the dangerous air pollution through scientific programmes.


During the recent Chhat Festival, the Yamuna river’s pollution again came to the fore with the shameless Delhi government making a separate small place for VIP dip into cleaner water that was brought through pipelines. It was a puerile effort to divide the smelly, frothy river into two.


As per estimates of a number of international agencies and NGOs, India loses a staggering two lakh people due to air pollution each year. Going by this, under the BJP government at the Centre, India lost at least 20 lakh people owing to diseases related to toxic air breathing.


Should the citizens not be up in arms to defend their lives? Just like Javdekar, Nitin Gadkari, in charge of roads and highways, had been claiming that he would try to reduce road mishaps and deaths. That figure is also bone-chilling - 1.50 lakh per year. But road accidents continue to claim precious lives of Indians, almost daily.


I know Javdekar or Gadkari or Modi alone cannot provide answers to pollution or mishaps but the Government can certainly create robust systems and laws to overcome this herculean challenge. So far, they have failed miserably. Aravali mountain range is under threat; trees are being cut ruthlessly and massive infrastructure is adding to dusty air.


Interestingly, London’s Mayor, Sadiq Khan, had contested his second term promising Londoners that of less pollution. He did that and won the second term. He is serving the third term since 2016.


India, under BJP, is busy erasing all signs of colonialism. It also has a logical hatred for China. All that is fine. But why can’t we learn good things from them to save the lives of Indians? India needs technology and university campuses from the UK but not interested to know what a Mayor does in the globally known beautiful city. We may abhor China (many electronic items and other raw material, including bronze cladding of Sardar Patel statue in Gujarat came from China) but why can’t we learn the art and science of mitigating pollution from them? After all it is the question of lakhs of Indian lives.


(The writer is a senior political and environment journalist based in Bhopal. Views Personal.)

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