I spent the first day of this year in the beautiful city of Kota in Rajasthan, India. I was hosted by the Leles, my sister-in-law’s family. Having spent his childhood in the city, the patriarch of the family, Uncle Lele, spoke of Kota with pride and excitement. Which brought us to inflation and the kota kachori.
The kota kachori is a deep-fried Indian snack made with all-purpose flour and a stuffing of lentils and spices. Uncle Lele shared how a kota kachori costed only 10 paise1 in 1966, while today it costs Rs.20 — 200 times the price in 1966!
“200 times” sounds insane at first! But when you do a quick calculation, you’ll find the price of the kota kachori grew at the rate of 10% per year over the last 56 years.
Now, let’s imagine for a moment that in 1966, Uncle Lele knew a kota kachori would get more expensive in the future and wanted to be able to afford one in 2022. He decided to put away 10 paise in an investment earning him an interest rate of 8% per year. Today, his investment of 10 paise would have grown to around Rs.7.50. Meanwhile, the price of a kota kachori was busy taking bigger leaps of 10% per year and touched Rs.20 today! We find Uncle Lele’s 10 paise never caught up with the kota kachori in 56 years!
What if, in 1966, Uncle Lele had, instead, invested his 10 paise in an instrument yielding 12% per year. His 10 paise would have been Rs.57 today, well over the price of one kota kachori! So, today he could have afforded not one but (almost) three kota kachoris!
Why am I sharing this story and the what-ifs that go with it? Well, inflation creeps up on not just the kota kachori but all goods and services you use! If you want to afford stuff in the long-term (10 years+), you need to start thinking about inflation-beating instruments.
Consumer Price Inflation rate in India has historically averaged around 6% to 7% per year. Uncertainties in the global economy, supply chain disruptions, increasing money supply in the market and rising demand are some of the factors that lead to burgeoning inflation.
While the historical average inflation rate is one guesstimate to go by while planning your financial future, it is important to remember that every financial goal has its own rate of inflation. For example, your travel goal may inflate at a different rate than your goal to buy a car or the goal to send your kid to college.
So, what are the kota kachoris of your life? What is going to be your investment strategy to beat inflation and achieve your financial goals comfortably?
I’ll be happy to learn about your kota kachoris and co-create an inflation-beating financial action plan! You can set up time with me by going here.
PS: I would like to thank the Real Uncle Lele for allowing me to have him as a character in my story. Uncle very kindly took me around his city and treated me to yummy kota kachoris during my stay there. I am happy to share he has made wise inflation-beating investments and is leading a comfortable retired life in Kota.
10 paise = one-tenth of an Indian Rupee