As a kid I remember getting irritated whenever the old people would get together. Now they’ll start talking about how expensive everything is, I used to mutter. Back in those days, kids couldn’t utter aloud all the insidious little comments that were swimming around in their heads when adults were around. “Arrey, on a salary of twenty rupees you could run the house and then have something left over? That shawl mamijee wears, no? That cost a full five rupees. Now toh, you can’t buy it for five thousand only.” Everybody shakes their heads. “Tch tch. Zamana hi kharab hai (these are bad times).” As a kid I remember buying sweets for 5 paise and bus tickets cost 25 paise (and I’m on my way to irritating the life out of kids in the family). My daughter has never seen coins below one rupee. Her daughter will probably say the same for fifty bucks. The fall in purchasing power is the reason that we worry about meeting our expenses when we retire.
A guy I know wanted to retire when he was 25. He just didn’t have the money. If I get Rs1 crore, he said, then I’ll retire. Now, 30 years later, he’s still working and still not done with gathering the corpus he needs to retire. Anyway, he’s wiser and agrees that financial security and going to work need not be either/or. People can continue to work even if they are financially secure. But how much do we really need to save out of our incomes to know that we will hit retirement with enough to maintain our lifestyle for another 30 years? Every time I speak to a friend about buying a life cover, he tells me—the risk we have is not of dying too soon, but of living too long.
I wanted some stuff and so dropped by the nearby mall a few weeks back. I like walking in a mall. It is clean, safe, there are loos unlike in most market places in India and you don’t really need to buy anything—the buzz of happy people all around is free. Buy guys, we need to grow at 8% GDP!
On this day, I’m surprised to see all the well-dressed women. Then I notice that many are wearing red. It takes ecstatic couples taking pictures around a Taj Mahal replica made fully of roses, and it clicks into place. Ah! Valentine’s’ day! So many happy people! While people have fun on this day, there is another day that I actually want to talk about.
The Fiscal Responsibility and Budget Management (FRBM) Committee submitted its report on 23 January 2016, a bit over seven months after it was set up. Read more on the origin of FRBM here: bit.ly/2klLFki. Though the report is not public, news reports say that the panel has recommended fiscal consolidation, but not at the expense of growth. Reports say that it tells the government not to worry if the fiscal deficit stays at, or just above, 3%. If your eyes are glazing over, unglaze them, because we’ll find out what this means and how it affects our lives.
The feeding frenzy on the possibility of long-term capital gains tax coming to equity for a while with editorials and TV shows hand-wringing about the retail investor getting hurt. But will we? Is a long-term capital gains tax on equity such a bad idea? Let’s get the basics out of the way first. The money we invest in different assets (bank fixed deposits or FDs, bonds, gold, real estate, equity and into some of these through mutual funds and bundled life insurance plans) throw off money in different forms. There is rent, interest and dividend that comes as income from an asset. This is income from owning and using an asset—financial (stocks, FDs and bonds) or real (gold and real estate). When you sell the asset you can either make a profit or a loss. Profits on sale of assets are called capital gains and in India are taxed under two heads—short-term and long-term.
Recently, I attended the 50th wedding anniversary celebration of the parents of a dear friend. Just the relatives numbered over 100 and they made it a point to come and be a part of the celebration. The obvious outpouring of joy at the event was also in part due to what her father had done for the family. Uncle was in the railways, and my friend tells me that it was this one job that funded the education and marriage of an extended family cohort. Many of us can identify with this story of that one job and its ability to lift an entire extended family out of genteel poverty. For many of us who grew up in households where the primary bread winner worked not just for the nuclear family but an extended family know the pressures it put on the house. Many of us, who rode up the rising tide of prosperity unblocked after the 1991 reforms, cannot scratch out our tight-money growing-up years. We cannot ditch the risk averseness that was built into life as it was. And I believe it did us good in terms of teaching the value of things and money.