The invisible hole

Even if you are the most careful, canny and aware investor, there’s a silent erosion of your wealth and there’s really nothing you can do about it. It’s called inflation.

     Print Edition: November 15, 2007

There’s a hole in your pocket and you haven’t got a clue about it. Even if you are the most careful, canny and aware investor, there’s a silent erosion of your wealth and there’s really nothing you can do about it. It’s called inflation.

Are you nodding wisely and saying that you’ve been keeping an eye on the inflation rate? And are you feeling smug about the fact that the rate of inflation had fallen to 3.07% in the first week of September, its lowest level in five years? Allow us to puncture that bubble of happiness. Because what you are being told about is the rate measured by the wholesale price index (WPI).

Like the name says, it’s all about inflation affecting wholesale prices. What should interest you because that’s what affects most of us is the CPI or consumer price index. And that tells a different story. The CPI for urban non-manual employees (CPI-UNME) was at 5.7% in September, down from January when it had breached 7%. Yes, it’s been coming down, but far too slowly to really matter.

Then there are other measures of consumer price inflation that are still running at levels as high as 8.8%. Your consumption basket is much closer to these indices than the WPI. Even if we go by the lowest of the three CPI inflation rates (CPIUNME), every rupee in your pay packet has lost 6% of its value in the past year.

Your savings bank account (which gives you a 3.5% interest) is worth 2.2% less than it was last year. And if you think that your debt instruments, which offer 8-9.5% interest, will cushion you, there is more bad news.

If the CPIbased inflation rates do not come down at a faster pace than at present, these instruments will generate hardly more than 2.3-3.8% returns. Inflation is a tricky beast it makes a mockery of your savings and investment efforts of the past, and it eats into your ability to invest or save for the future. So how do you ensure that it doesn’t catch you unawares?

When you choose your investment instruments, factor in the rate of inflation. For your money to grow by 10%, look for an asset class that can generate at least 16% returns (assuming an average annual rate of inflation of 6%). Ideally, of course, break down inflation estimates for specific goals.

If, however, you find that too complex, stick to a higher overall estimate for the long term. Once you’ve done that, review the effect of inflation on your investments at least once a year. While that may not help you beat inflation entirely, it will at least ensure that your savings remain respectable and have not all fallen through a hidden hole.

-Kamya Jaiswal

 

Bus tickets online

Air tickets, train tickets, cruise tickets… so why should bus tickets be excluded from the online mania? Answering that question are three new portals, launched within weeks of each other this year www.redbus.in, www.ticketvala.com and www.abhibus.com.

While the first two portals have limited reach as of now, Redbus concentrating on the south and Ticketvala on the west coast, Abhibus is more pan India since it caters to over 200 cities. Bus ticketing system is a largely unorganised sector and we saw a clear gap that we could address.

To reach the non-English speaking customers, we have launched call centre services in local languages too, said Haranath Lokanadham, CEO of Ticketvala. All three portals have tied up with travel agents and private bus operators to ensure greater connectivity. What’s more, none of them charge a booking fee. Accepting both cash and plastic, the portals redefine convenience.

Should you not have a Net-enabled computer at home, Redbus will even home deliver tickets. So will Ticketvala, but the service is limited to Mumbai. And though it’s early days yet, the portals are attracting sufficient business. Says Phanindra Sama, one of the founders of Redbus, We have had 6,00,000 hits since our launch.

Now Indians will have information at their fingertips, be it a cost comparison, bus routes or timings. One can even book at the last minute without wasting time in queues. All in all, bus journeys are becoming easier. Even before you embark on one.

-Sushmita Choudhury

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