CA Nitin Kaushik’s recent post on X offers a sobering reminder about the complexities of earning in US dollars, and how this perceived advantage may not always translate into financial gains. While it’s a common belief that earning in dollars automatically equates to being financially better off—especially in countries like India—Kaushik argues that this assumption overlooks several critical factors, particularly inflation, taxes, and the depreciation of currencies.
Kaushik explained that earning in US dollars sounds appealing at first, but the reality is far more complicated. He used an illustrative example to highlight this. Imagine you’re holding $1,000 today. While this may seem like a significant amount, consider the impact of inflation, which in the US hovers around 5%. Next year, due to inflation, that same $1,000 will have the purchasing power of just $950, effectively reducing your wealth. The depreciation of the Indian rupee against the dollar further complicates matters. If you convert that $950 into Indian rupees, the rupee’s constant decline—typically 4–5% annually—would mean that you would receive even less value in rupees than you initially held in dollars.
Kaushik's point here is clear: when you factor in both US inflation and the weakening of the Indian rupee, the value of your dollar earnings takes a double hit. He goes on to address an argument often put forth by those who claim that Indian salaries have been growing at a faster pace. While Kaushik acknowledges that some may experience salary growth, he questions whether this trend continues to hold true today. He asks, “How many of you are getting a 10% raise every year?” This is a relevant point, especially in an economy where wages are increasingly stagnant and the cost of living continues to rise.
Moreover, even if individuals are receiving salary increases, the rising tax burden—both direct and indirect—eats into the gains they make. Taxes, in the form of higher income tax rates, as well as the introduction of new forms of indirect taxation like Goods and Services Tax (GST), have contributed to reducing disposable incomes. According to Kaushik, this is a significant reason why India’s Savings-to-GDP ratio has fallen to a 50-year low. While more people are earning, they are saving less and less.
Taking a broader look at currency trends, Kaushik points out that the US dollar has lost around 35% of its value over the past decade due to persistent inflation. However, the depreciation of the Indian rupee has been even more pronounced. On average, the rupee depreciates by 3–5% annually, which adds to the financial strain on Indian residents. Kaushik attributes this depreciation to a combination of factors, such as higher interest rates in the US (which strengthens the dollar), India’s persistent trade deficits, the outflow of foreign capital, and a general trend towards a stronger dollar globally. These elements have placed considerable pressure on the Indian rupee and contributed to its consistent depreciation against the US dollar.
What’s even more striking is Kaushik’s argument that real income isn’t just about the raw salary amount you earn, but what you are left with after all deductions, including inflation, taxes, and currency depreciation. This is a crucial perspective that highlights that true wealth creation involves much more than just earning a high salary. The key lies in what remains in your pocket after you factor in the hidden costs that chip away at your earnings—like the aforementioned inflation and taxes.
Kaushik asks the pressing question: “Are you growing wealth, or just running on a treadmill?” This statement encapsulates the crux of his message: despite rising earnings, many people may not be genuinely building wealth because the factors eroding purchasing power and savings are not being addressed. With inflation eating away at real income and currency depreciation working against the rupee, it becomes increasingly challenging to accumulate wealth in the long run. The question, therefore, is not just whether you are earning more, but whether you are effectively securing your financial future by preserving and growing the value of your earnings over time.
In his post, Kaushik also touches upon the broader economic context that impacts both individual finances and the national savings rate. The country’s weakening savings rate is a concerning trend, one that speaks volumes about the changing economic dynamics in India. Rising consumption, higher taxes, and an unrelenting inflation rate are contributing to a situation where individuals are not able to save as much as they should, even if they earn more.
Kaushik’s message, though critical, serves as an important reality check for people who might be under the illusion that earning in US dollars or seeing their salaries rise means they are automatically on the path to financial prosperity. It’s a reminder that wealth is not simply about accumulating income but about understanding the broader economic forces that affect how much of that income can be preserved and accumulated over time. In today’s global economic climate, the true challenge lies in mitigating the negative impacts of inflation, currency depreciation, and taxes to ensure long-term wealth accumulation and financial security.
Ultimately, Kaushik's post calls for a more nuanced understanding of income and wealth. While earning in US dollars may seem like an advantage, the real financial picture only emerges once you take into account all the factors—such as inflation, taxation, and currency depreciation—that can erode the value of those earnings.
