personal finance

Is there an asset class that will die a slow death in India?

“Change is the only constant” we have grown up listening to this statement. And of course, we also see that being true. If you notice the way we communicate, the way we transport, the way we dress, the way we transact and the way we do everything today, all have been transitional. What worked the best 10 years ago, doesn’t seem to be fit today. Whatever worked best 100 years ago, seems so old-fashioned today. Things, ideas and thoughts die, to emerge out to be something relevant to their current era.

And finance is no different. For centuries, Indians have been investing in gold and land to secure their future. We have had the banking system in our country running since the late 1800s. Availing loans from the Sahukars and putting out family’s long-kept assets as mortgages had been some of the lending systems that were the only thing people knew about having an asset class. This was a prominent asset class till India‘s independence.

With better economic growth, government-run policies and promotion of education, Indians were exposed to a lot of the then modern-day financial instruments. Post-independence people got to know about banks and why storing money in the banks was a better option instead of keeping all the assets at their homes. The post office used to be another home for the people, the postman was no less than one’s relative. And hence, people also got to know about the post office savings schemes that Indian Post had to offer. There are still nine India Post savings schemes that run as of today. The National Savings Institute also worked closely with India Post and popularised the saving schemes. The retirement plans were welcomed with open arms by the citizens, the mutual funds were being understood and the PF was taken into consideration while discussing salary.

But, are these still relevant today? Is it the same India as it was in the 1960s? Have we not advanced in technology and education? Of course yes. We have. The penetration of the internet to even remote villages of our country has changed the way we finance and look up to an asset class.

The asset class we relied on fifty or forty years ago was based on the economic condition of the country, the education, the knowledge about the asset class, and most importantly the risk appetite.

The average Indian back then was struggling to afford a decent lifestyle for a family of five or six or seven. There was only one member who would be the bread earner. The financial decision-maker was left with no choice to opt for an asset class that could guarantee a fixed return with minimum or no risk at all. People could find these features in banks, the interest they would get through bank deposits, the FD, the recurring deposits, the life insurance schemes, the KVP, the NSC and other similar asset classes. Since people believed in gold, they believed in government-issued currency. And which eventually developed their trust in the schemes that were run by banks and other centralised institutions.

Fast forward to today when an average Indian is making enough money to give an above-average lifestyle to his/her family members. The joint families have shrunk to the nuclear family of three or four. There is more than one family member who is earning, and where education and information are accessible. Financial advisors can be hired, who can make better decisions for you and your savings.

The majority of Indians now have developed a good risk appetite. They are beyond their fears to lose all of their money. This is because they are smart enough to not put all their money at stake. Also, they are intelligent enough to understand that whatever they decide to put into investments, they aren’t putting in one asset class.

Those asset classes that assure decent but fixed returns are not completely left over. Every asset class has its benefits to offer to one or the other class of Indian society. But new asset classes like cryptocurrency, digital gold, virtual currencies have seen great acceptance in a short period.

Even though we do not see an immediate death of any asset class but the one lined up next could be the investments through post-offices. On the other hand, we surely see a humongous leap in the way new-age currency is dominating the investment strategy of Indians in the coming years.

The writer is Co-founder & CEO, Unocoin Technologies Private Limited. Views expressed are personal


Leave a Reply

This website uses cookies. By continuing to use this site, you accept our use of cookies.