How does inflation dent your financial planning? - Pragnya IAS Academy - News Analysis.

How does inflation dent your financial planning?.

Inflation hits your financial plan on multiple counts. It impacts your future cost of living.

Inflation is quite often called the thief of purchasing power. Why is that so? That is because inflation measures the rate of price rise per annum. If the price of food, fuel, clothing and housing are growing very fast each year then it means that your income will be able to buy less of the same thing. Alternatively, your income will have to grow faster than inflation so that at least your standard living can be maintained. But how does inflation impact your financial planning?
Financial planning entails laying out your long-term financial goals and then creating a plan to move towards these goals. Inflation hits your financial plan on multiple counts. It impacts your future cost of living; it has an effect on the real returns that you will earn on your investments and it will also have an impact on the way you plan for your future goals. Let us look at four such effects.
1. Effect on the value of your future goals
The way you go about financial planning is that you first lay out your dreams and then work backward to see how you need to invest for the same. However, when it comes to your retirement planning, you first need to project your monthly maintenance costs. The normal method of doing it is that you take your current costs and inflate the number into the future with appropriate assumptions. Then that number gets adjusted for a shift in standard of living.
2. Future inflows are going to be worth a lot less today
This is a contra approach to looking at financial planning. In the first point, we looked at the future value of today’s money. At this point, we are looking at the present value of future money. Let us say you are going to receive fixed corpus of funds in the future. Shifts in inflation will make a difference to how much these future inflows are worth today.
3. It eats away a part of your returns
In financial planning, the real returns matter a lot more than the nominal returns because that is what determines the purchasing power. For example, if a bank FD is giving returns of 8% when inflation is 5%, then your real return is 3%. However, if bank FDs are giving 9% returns with inflation at 7% then your real returns are just 2%. It is not just the nominal returns on your investment that matters. What also matters is how much of real returns you are earning. That gets impacted by the rate of inflation. That is how inflation tends to impact your returns on investment.
4. Review of your insurance requirements
Your life policy is normally your back-up to take care of your family in the event of any exigency. How is the life policy corpus determined? For example, if you expect that your family will need a monthly income of Rs.1 lakh to run the house, then you can take a policy of Rs.3 crore so that even if the corpus is invested in a safe money market fund giving 4% real returns, that can still cover the needs of your family. However, if inflation was to go up, then the insurance corpus will have to be higher.
What does all this add up to?
When inflation goes up, your eventual corpus requirement will go up. Then you have two choices. You can either reduce your goal amounts; which is quite difficult or you can increase your monthly SIP savings. When inflation goes up your future goals have to be met with higher savings or higher risk investments. It is a choice between the devil and the deep sea. (Source: The Business Standard)


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How does inflation dent your financial planning?.

Technology and Financial Innovation to drive the Ganga Cleaning Mission - Pragnya IAS Academy - News Analysis.

Technology and Financial Innovation to drive the Ganga Cleaning Mission.

India Water Impact Summit ended in New Delhi on Friday.A working group to develop model Urban River Management Plan.

A range of innovative technology and financial innovations will drive the Ganga cleaning program as was deliberated during the three-day India Water Impact Summit, that concluded on Friday in New Delhi. It was organised by NMCG (National Mission for Clean Ganga) in collaboration with cGanga and saw participations from experts in various fields from 16 countries.
Afforestation, biodiversity, urban river management, data harmonisation, development of water bodies, water valuation and market development, financing in water sector and innovation in sewage and sewerage management were the key topics discussed over three days during the summit.
The three-day summit was inaugurated by Shri Nitin Gadkari, Minister of Water Resources, River Development and Ganga Rejuvenation, Road Transport & Highways and Shipping, in the presence of Shri HardeepPuri, Union Urban Development Minister and Dr. Satyapal Singh, Minister of State for Water Resources, River Development and Ganga Rejuvenation. Hon. Ms Cecilia Dapaah, Minister of Water Resources, Ghana, Shri U.P. Singh, Secretary, MoWR, RD & GR, Shri Rajiv Ranjan Mishra, DG, NMCG, Steven Schonberger, Director of World Bank , Maya Kadosh, Deputy Chief of Mission, Israel, Jasper Wieck, Deputy Chief of Mission, Germany, JozefDrofenik , Ambassador of Slovenia and Dr Vinod Tare, Head cGanga, were among other dignitaries present on the occasion.
During the inaugural session of the summit Shri Nitin Gadkari announced the successful tapping of the SisamauNala of Kanpur, which discharged 140 million litres per day (MLD) of polluted water into the Ganga. The Minister expressed his satisfaction with the work of the National Mission for Clean Ganga (NMCG) on the occasion.
MrDapaah, Minister of Water Resources, Ghana also committed to take across Africa global innovations that India successfully implements in the NamamiGangeprogramme.
During the valedictory session, Shri UP Singh, Secretary, MoWR, RD & GR expressed his satisfaction on the content of the dialogue. He emphasized on the creation of the working groups as one of the major takeaways from the summit. This will help in converting technology to working models.
Shri Rajiv Ranjan Mishra, DG, NMCG said, ‘The state wise session was a unique deliberation in this version of IWIS. The ministers from the states and senior bureaucrats discussed the various challenges that they face at the ground level implementation of the program. The suggestions from the experts were: engaging state/urban local bodies in policy planning, incorporating local/traditional knowledge in implementation, encouraging zero liquid discharge, decentralization and community driven treatment of sewege& effluents. A working group would also take up development of a model Urban River Management Plan which would be looking comprehensively at the interrelation of river and city and connecting people with the city. Denmark offered their support in this matter.
The technology and innovation deliberations attracted 16 leading companies from 8 nations in a very exciting and a participative workshop. Domains and areas ranged from artificial intelligence, Internet of things, machine learning to latest advancements in waste water recycling, reuse and material recovery, waste-to-energy, satellite imagery with very high resolution, sustainable agricultural practices using soil-less membrane farming, run of the river hydropower units and overall areas of technologies supporting circular economy were presented. The technologies are novel and noble with lower land and energy foot-print, robust but simple electromechanical systems, optimal operations and maintenance costs with low carbon footprint.
NMCG has streamlined the introduction and acceleration of technology deployment through an Environment Technology Verification (ETV) process that allows companies to showcase the success and efficacy of their solutions through a pilot demonstration project. The Government is inviting technology solution providers to apply for the ETV programme in the areas of decentralised waste water and industrial effluent treatment, data and information and ancillary services such as solid waste management, sustainable agriculture and hydropower.
The Summit introduced the Ganga Finance Forum, which brought together a number of national and international financial sector experts highlighted the gaps but equally provided a plethora of innovative financial instruments to support the Ganga Rejuvenation programme. These include issuing of masala bonds in international markets to tap into long-term debt financing through capital markets, using specialist guarantee and credit enhancement instruments, specialist foreign exchange hedging products for those using external commercial borrowing structures. The group unilaterally agreed to create blended finance products such as social impact bonds. An interesting solution to use blockchain and tokens to raise capital has also been suggested by select companies specialising in the fintech sector.
Data and Information asymmetry has been long identified as the crucial missing link. The Summit enabled NMCG to take a leap forward in initiating a number of initiatives in data harmonisation that will develop platforms and approaches to increase interoperability of data being generated by a network of agencies working in the water sector. NMCG invited big data and analytics companies and entrepreneurs to partner with it to develop next generation data solutions that will help policy makers and investors in equal measure with irrefutable and accurate data.
The Summit yet again highlighted the need to value water. It prompted subject matter experts to think of the development of local area water markets so that true economic value of water can be established that will lead to better pricing strategies.
The India Water Impact Summit is an annual event to provide a platform to start a discourse towards understanding water as a natural resource. The efforts may take various forms: data collection, hydrology, e-flows, agriculture, waste water and more.
cGanga:
The Centre for Ganga River Basin Management and Studies is a think-tank and Centre of Excellence to the National Mission for Clean Ganga. In 2015 a consortium of seven Indian Institutes of Technology (Kanpur, Delhi, Madras, Bombay, Kharagpur, Guwahati and Roorkee) created the Ganga River Basin Management Plan. The objective of the plan was to take comprehensive measures for the restoration of the wholesomeness of the Ganga ecosystem and improvement of its ecological health, with due regard to the issue of competing water uses in the river basin. (Source: pib)


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Technology and Financial Innovation to drive the Ganga Cleaning Mission.

Financial inclusion is the main mission of India Post Payments Bank - Pragnya IAS Academy - News Analysis.

Financial inclusion is the main mission of India Post Payments Bank.

The India Post Payments Bank has been incorporated as a public sector company under the department of posts with 100% government equity and is governed by RBI.

Ahead of the launch of India Post Payments Bank (IPPB) by Prime Minister Narendra Modi on Saturday, the managing director and chief executive officer (CEO) of the bank, Suresh Sethi, spoke about IPPB’s objectives, goals and expansion plans. The bank has been incorporated as a public sector company under the department of posts (DoP) with 100% government equity and is governed by the Reserve Bank of India (RBI). Edited excerpts from an interview:
What is the main aim of setting up IPPB?
We are looking at financial inclusion as the main mission of the bank. Our focus will be on segments that today have challenges in either accessibility or affordability. From a vision perspective, we are looking to bring the most affordable, accessible and trustworthy bank to the last mile consumer.
10 things to know about India Post Payments Bank:
1)India Post Payments Bank has been set up under the Department of Posts, Ministry of Communication, with 100% equity owned by Government of India.
2) It started operations on 30 January, 2017, by opening two pilot branches, one at Raipur and the other at Ranchi.
3) India Post Payments Bank will offer 4 per cent interest rate on savings accounts.
4) Payments banks can accept deposits of up to Rs 1 lakh per account from individuals and small businesses, but do not have the mandate to extend loans.
5) But India Post Payments Bank will, in alliance with other financial service providers, offer third-party products. For example, in case of loans, India Post Payments Bank will work as an agent of PNB.
6) India Post Payments Bank will offer a range of products such as savings and current accounts, money transfer, direct benefit transfers, bill and utility payments, and enterprise and merchant payments.
7) These products, and services, will be offered across multiple channels (counter services, micro-ATM, mobile banking app, SMS and IVR), using the India Post Payments Bank’s technology platform.
8) India Post Payments Bank has been allowed to link around 17 crore postal savings bank (PSB) accounts with its accounts.
9) India Post Payments Bank “has been envisioned as an accessible, affordable and trusted bank for the common man,” the government said in statement. It will leverage the vast network of the Department of Posts, which covers every corner of the country with more than 300,000 postmen and grameen dak sewaks.
10) The Cabinet earlier this week approved an 80% increase in spending for India Post Payments Bank (IPPB) to Rs 1,435 crore. The increase will take the IPPB project outlay to Rs 1,435 crore from Rs 800 crore -- giving it additional firepower to compete in the market with existing operators like Airtel Payments Bank and Paytm Payments Bank.
What are the key focus areas?
The segments that we are looking at specifically include homemakers, senior citizens, urban migrants, people in rural India, including students who come to urban areas for education and need funds. We will also be looking at unorganized retail where payments today are largely dominated in cash. We want to create a less cash system so that kirana stores and merchants would become part of the ecosystem where IPPB accounts can be used and they can interact digitally rather than accepting cash.
How will the bank benefit by operating under DoP?
DoP becomes very critical for bringing a change of this scale because of its huge physical network and human capital. Today, DoP has around 1.55 lakh points of service out of which 1.30 lakh are in rural India. Today there are around 50,000 bank branches all put together. Now, if we look at the fact that we bring in around 1.3 lakh points of service, the rural banking ecosystem will get scaled up by 3.5 times. This brings us to a very different comparison on what we can do for the last mile.
DoP has around 300,000 people out there providing postal services and our mission is to make sure that each of these people also becomes IPPB’s service provider. These are postmen and gramin dak sewaks who will also offer doorstep banking services.
DoP is going to act as our corporate banking correspondent and these will be the last mile service providers.
Any plans to scale up the number of banking agents?
I think this is a big enough number to begin with. Our biggest leverage is going to be able to make each and every of these 300,000 people financially literate to be able to advise somebody about banking services.
There is a huge amount of effort and investment going into training these people as they are now going to function as bank service providers.
What kind of investment will go into training these banking agents?
We are giving these postmen smart phones on which a mobile agent app will be installed and also a biometric device for authentication. All these applications will be connected on real time basis with our core banking system. It will meet the stringent RBI guidelines to make sure that each transaction is online. We have invested in very high-end technology capability to make sure that our applications are simple, intuitive and leveraging on RBI’s payment and settlement system, which make them affordable and help us take interoperable services to the last mile. For the launch, more than 800,000 man hours have gone into training 15,000 people out of which 11,000 will be providing banking services at the doorstep. By the end of the year, all the 300,000 people will be up and running.
RBI has been very stringent with other payment banks on the failure to meet the compliance criteria. How prepared are you on this front?
There is a lot of focus in making sure that all RBI guidelines in terms of establishing the bank are met, including creation of the right customer facing processes and compliance with end-of-day balances.
We have taken due diligence and made sure that everything is first time right. We have got requisite RBI approvals and things have been reviewed by RBI on how it is being implemented. (Source: Livemint)


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Financial inclusion is the main mission of India Post Payments Bank.