Business Talk

Their was a time , in the 1930s , when prices remained more or less constant .They did rise marginally but the rise was too small to have a significant impact on the cost of daily living . As a result most people felt economically secure and did not feel the necessity to take investment seriously.

In the 1960s, this scenario underwent a drastic change. Prices began rising steadily and continuously, and the value of the rupee dropped sharply. The economic security of fixed-income groups disappeared. In 1970s and the early 1980s saw a further acceleration in these trends.

Consumer prices have risen by over ten times in the last 33 years. In terms of purchasing power, the worth of a rupee had fallen to only around 4 paise in 2004 as compared to1960. In the forty years from 1960 to 2000, the annually compounded rate of inflation has been around 7-8 per cent.

It is now quite clear to most people that inflation has come to stay, and to stay permanently though after forty years of high inflation there is a possibility of a lower rate of inflation in the 2000s.

Salaries and pensions are no longer adequate for meeting daily needs as they once were. Hard work thrift and accumulated savings are no longer enough to provide for one's future. Savings have to be intelligently invested and you have to actively manage your investments if you are to succeed in increasing, or at least in preserving, the purchasing power of your savings.

You have not only to make sure that the rupee value of your savings grows with time, but also that the rate of their growth is higher than the rate of inflation. If the rate of inflation is 8 percent, the after tax income must increase by at least 10 percent to 12 percent if you want to improve your standards of living. And point to be noted is that, in the year 2006, it rose by 25 percent.

This is the main reason why it has become essential for everyone to acquire a basic knowledge of investing. You will find it much easier to cope with the economic problems of the future if you know where and when to invest.