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Business News/ Opinion / Blogs/  Tackling lifestyle inflation
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Tackling lifestyle inflation

Today, everything we consume is brandedright from caps to shoes

Pradeep Gaur/MintPremium
Pradeep Gaur/Mint

“June CPI (consumer price inflation) at 29-month low of 7.31%," read the headline on a financial news website and both the bond and equity markets gave a big thumbs up. Most investors hope that the inflation will go down even further.

CPI measures changes in the price level of a basket of consumer goods and services purchased by households. This data is published by the Central Statistical Office on a monthly basis. But do you believe this data? At least I am not convinced. When I go to fruit and vegetable markets, the price rise I see on a regular basis is all but not 7%. The same goes for milk, groceries, petrol and autorickshaw fares. By the way, most of them are basic necessities.

Realistically, in my opinion, CPI stands at 10-12%, i.e. every year on average the prices of a basket of essential goods which we consume on a regular basis goes up by 10-12%. But I am not worried about this inflation. Whatever be the price of milk, bread, apples 10 years down the line, we will still be consuming them. It’s the people below the poverty line who are affected by this. However, there are few areas where even middle class households cannot escape. Real estate prices, education fees, medical expenses—they are all clearly rising at 12-13% per annum. There are various asset classes such as fixed deposits, gold and equity which can either match or beat this inflation in the longer term, at least on paper.

However, I am more worried about something called “lifestyle inflation" which is more of an issue with the younger generation. These are more of a want but looks like becoming a necessity these days with the next-gen.

Today, everything we consume is branded—right from caps to shoes. And in most of these cases, more often then not we are attracted by the phoren (foreign) brands. In fact, the laptop on which this article was written is an Apple Macbook (I, too, am a victim of lifestyle inflation!!!). No wonder multinational companies’ stocks are at all-time high.

I shall share a classic real life story. My younger brother got married three years ago. When he was engaged, he got a Tommy Hilfiger watch from his fiance worth 7,500. Until this, he used to wear a Titan Fastrack watch worth 1,500. Do you think he can ever wear a 1,500 watch in his life now? The problem doesn’t stop there. Since he got a gift from his fiance, he had to give a return gift as well. Could that gift be less than 7,500? He ended up giving a Dolce & Gabbana handbag worth 9,500 to her. Now, this young couple will find it difficult to go back to their original accessories.

Second example is of a car. Earlier, there used to be good old Bajaj scooter for the whole family. Now, for each member in the family, car is a necessity. The problem is even more acute. Today, every family wants not just a car but a “caaaar" and have a sedan or sports utility vehicle and not a small car (no wonder Tata Nano was a disaster since it was considered as a “cheap" car).

Another example is of higher-end smartphones. Today everyone wants to own higher end of the phones, the prices of which ranges from 40,000-50,000. Whether they know the full functionality of these glamourous gadgets is another question but they would certainly like to show off to their peer groups hum kisi se kam nahin (I am not inferior).

The list can go on and on. In fact, I have not included expenses such as marriage and other family celebrations, annual foreign vacations, compulsive habits (such as drinking and smoking) which can cast a severe dent on ones financial well-being.

However, there are a few investments which can beat lifestyle inflation. One such logical investment is to play the consumption story. While the rest of India goes to malls and supermarkets, why not invest in the companies which sell these items? As an intelligent investor, if my friend buys Maruti Swift, I go and invest in the company. If my neighbour dines at a luxurious ITC hotel, I buy ITC Ltd stocks. When my wife wants to buy the glittering diamond set from Tanishq, I don’t frown. I put my money in Titan Co. Ltd. So basically, I am riding on the lifestyle wave and I shall continue to make money as long as my fellow citizens go out and spend lavishly.

Gajendra Kothari is managing director and chief executive officer, Ética Wealth Management Pvt. Ltd.

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Published: 29 Jul 2014, 12:18 PM IST
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