top of page

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.)

When Nations Stay Away: Sri Lanka's SCO Absence

One notable absence was Sri Lanka’s President Anura Kumara Dissanayake, despite the country holding ‘dialogue partner’ status since 2010.

ree

The Shanghai Cooperation Organisation (SCO) is a key Asian forum, bringing together China, Russia, India, Pakistan and four Central Asian republics to discuss security, economic cooperation and regional stability .The Tianjin summit took place from 31 August to 1 September 2025 and drew over 20 world leaders. Attendees included Indian Prime Minister Narendra Modi—his first visit to China in seven years—and Russian President Vladimir Putin.”One notable absence was Sri Lanka’s President Anura Kumara Dissanayake, despite the country holding ‘dialogue partner’ status since 2010. Officials cited his ‘crowded schedule’, but the absence reflects deeper geopolitical currents as Sri Lanka navigates international waters amid external pressures and competing alignments.


Sri Lanka’s diplomatic challenges go beyond the SCO. Its ties with BRICS—a bloc of Brazil, Russia, India, China and South Africa, representing about 40% of the global population—follow a similar pattern. BRICS meets annually to coordinate trade and development finance and reduce reliance on Western-dominated institutions.


Sri Lanka applied for BRICS membership in October 2024 and secured backing from several foreign ministers. However, at the Kazan summit in Russia, it sent only its Foreign Secretary instead of a high-level delegation. While other nations gained ‘partner’ status, this proved costly, and Sri Lanka’s application was rejected. It did gain access to the BRICS New Development Bank, which could aid its economic recovery.


Global Patterns

Sri Lanka is not alone; such behaviour reflects a broader trend of nations making tough alignment choices, often resulting in strategic absences from major forums.


Diplomatic boycotts occur even within established blocs. ASEAN has excluded Myanmar from its summits since the 2021 military coup, with six consecutive absences damaging its regional standing and economic prospects. Absenteeism has also risen across Southeast Asia, as Indonesian and Thai leaders skip summits for domestic commitments, reflecting shifting priorities even among founding members.


In 2024, Sweden, Estonia, Latvia, Lithuania, Poland and Finland boycotted meetings in Hungary over Prime Minister Viktor Orbán’s unauthorised wartime visits to Russia and China. The European Commission also partially boycotted Hungary’s EU presidency, sending civil servants rather than commissioners.


Several factors explain Sri Lanka’s recent diplomatic absences. Reports suggest it declined China’s SCO invitation due to ‘pressures from an undisclosed foreign mission’, highlighting the tough choices smaller nations face amid competing powers. Its economic crisis also demands careful balancing: India has provided $4 billion in aid, while China holds major infrastructure stakes, including Hambantota Port. Notably, President Dissanayake’s National People’s Power government, despite its pro-Chinese roots, chose India for his first overseas visit, signalling a recalibration of regional ties.


Regional recalibration

Sri Lanka’s summit diplomacy reflects global realignments, as smaller nations face pressure to pick sides in great power competition, creating both risks and opportunities for regional powers like India.


The key lesson for Indian policymakers is to move beyond exclusive ties and demonstrate India’s value as a reliable, patient partner supporting neighbours’ legitimate economic and international goals.


India’s ‘Neighbourhood First Policy’—launched in 2008 and strengthened after 2014—aims to deepen ties with neighbours through economic cooperation, infrastructure and cultural exchange. Yet it faces challenges across the subcontinent, with Chinese Belt and Road investments creating competitive pressures and yielding only mixed results.


While India provided crucial aid during Sri Lanka’s economic crisis, it struggles to match China’s long-term infrastructure commitments. Similar trends appear elsewhere—the Maldives shifts between India and China, while Nepal increasingly turns to China for development. Sri Lanka highlights both the challenges and opportunities of India’s regional approach; despite substantial aid, the relationship demands constant recalibration against Chinese influence.


Sri Lanka’s absence from major multilateral forums creates opportunities for India to strengthen bilateral ties. India could fast-track the proposed Economic and Technological Cooperation Agreement, expand digital collaboration through platforms like Aadhaar, and support Sri Lanka’s IMF bailout while boosting infrastructure investments.”


Rather than competing with China in infrastructure, India can support Sri Lanka’s BRICS membership, aid integration into Indian Ocean initiatives, and promote South-South cooperation. President Dissanayake’s assurance that ‘Sri Lankan territory would not be used in ways inimical to India’s security’ is a notable diplomatic gain India can build on.


Sri Lanka’s recent summit absences create openings for India to rebuild regional influence subtly. Success requires addressing economic, security and political concerns without the competitive edge that has sometimes marked India’s diplomacy. Sri Lanka offers a test case for an evolved strategy—support over pressure, patience over demands, and mutual benefit over zero-sum competition—that will likely shape India’s regional approach for years.


(The writer is a foreign affairs expert. Views personal.) 

Comments

bottom of page