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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.)

What the Numbers Say About India’s Education Crisis

A deep dive into the numbers behind India’s education system reveals uncomfortable truths about our national priorities.

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Every year around the budget season, we hear the same headline: “Education gets a push.” Ministers beam, social media timelines light up with infographics, and we are told that change is round the corner.


But here is the reality: if change is coming, it is walking to school barefoot in the rain. India, the land of zero and jugaad, somehow cannot solve the simple math of educating its population. We talk about becoming a $5 trillion economy, producing global CEOs, and leading the tech world, yet we still cannot get a blackboard in every classroom or a trained teacher in every village.


Let us break this down and start with the significant promise that 6 percent of GDP will be spent on education. This number has been bandied around since the 1960s like a family heirloom no one is willing to use.


Now, the truth: In the 1950s, education spending as a percentage of GDP was under 1 percentage. By the 1980s, we hit 3-4 percent. From 2010 to 2023, we hovered between 3.4 and 4.4 percent. In 2023, a jaw-dropping 2.9 percent. To put it into perspective, we’ve spent more on advertisements for education schemes than fixing them themselves.


Meanwhile, countries like Brazil, South Africa, and even Nepal have outpaced us in education spending as a share of GDP. In 1947, India had a literacy rate of around 12 percent. It is about 77 percent today, with youth literacy at around 90 percent. So yes, we have moved forward. But at a pace that would make a tortoise raise an eyebrow. Compare this with countries that started at similar levels in the mid-20th century. South Korea, for example, is now at 98 percent literacy and most of Europe hit 99 percent decades ago. We have done well, but let us not throw a parade yet. And do not let national averages fool you. Rural-urban gaps are wide, state-level disparities are stark, and gender inequality is still stubbornly present.


Now for the good news: primary school enrolment has increased significantly thanks to policies like the Right to Education (RTE). We have got kids in schools. The bad news – they are not learning much. Multiple independent surveys (like ASER) show that many Class 5 students cannot read a Class 2-level text or do basic arithmetic. It is like opening a bank account and finding it is full of Monopoly money. Technically correct, but practically useless.


Our education infrastructure is akin to schools without ceilings and teachers without training. The average government school in India is fighting at least three wars: lack of infrastructure, staff, and resources. Some do not have toilets. Others do not have electricity. And many do not have full-time teachers. In 2023, there were still over one lakh teacher vacancies in government schools. Teacher absenteeism remains high. And the teacher training pipeline? Let us just say it is more of a leaky tap than a flowing stream.


We expect teachers to deliver miracles on low salaries, with outdated syllabi and in overcrowded classrooms. And then, we wonder why learning outcomes do not improve.


As a country, we love our education policies. We have produced a rich buffet of reform ideas from Operation Blackboard to Sarva Shiksha Abhiyan to NEP 2020. However, a policy without consistent funding is just a nicely printed pamphlet. NEP 2020 promised transformational change, but implementation is sporadic, uneven, and mostly still on paper.


We have a policy for everything, be it teacher development, vocational training or digital literacy, but no coordinated system to fund or monitor them with muscle. It is like building a house with 10 blueprints and no bricks.


One wonders as to why this matters at all. Why bother? Because education is not a ‘sector’ but the foundation. You cannot build a strong economy, a fair society, or even a functioning democracy without it. Education improves health, reduces poverty, boosts GDP and increases civic engagement. Yet, in India, it is often treated like a noble cause rather than a national strategy.


And here is the kicker: every single one of us is affected. If not directly, then by the ripple effects, be they job quality, innovation, social mobility, economic productivity and even crime rates. Everything connects back to who is standing in front of a classroom and what they are equipped to do.


We are past the point of polite debates and pretty reports. The numbers have spoken. The gaps are wide. The system is overburdened and underfunded. We do not need more slogans. We celebrate our IITs and IIMs while ignoring the crumbling feeder systems that are supposed to get students there. We cheer when Indian-origin scientists win Nobel Prizes abroad, but rarely ask why they had to leave in the first place. Excellence cannot be reverse-engineered from the top down. It must be built from the ground up with every child in every school given a real shot.


We need sustained spending, teacher development, proper infrastructure, measurable outcomes and one hell of a wake-up call. Because if we keep doing the same thing and expecting different results, we are not just failing our children but failing ourselves.


(The author is learning and development professional. Views personal.)

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