Illustration by Pratik Bhide for 1 Finance Magazine

A market crash, rising inflation, a devastating war, and respite from lockdowns amid an ongoing pandemic. The past year has seen global and national-level events that have had a trickle-down effect on our finances, even as individuals. Here’s a highlight reel of what influenced how we managed our money in 2022 — in no particular order.

Cheap and Easy Credit Availability

Over the course of the pandemic, as people spent more time at home, for many, daily expenses decreased, resulting in more income to spare for investing. In FY22, the number of active demat accounts in India reportedly increased by 63%. Simultaneously, central banks across the world and in India reduced their interest rates. Digital banking and trading were more widely adopted — as were Buy Now, Pay Later plans and EMI payments. All of this led to greater interest in seeking loans, which were now available at cheaper rates, and without the hassle of recurring visits to the bank. As reported by The Economic Times, spending on credit cards also rose by 13%, compared to 8% in FY21. The infusion of liquidity in the economy owing to these factors allowed people to spend more on cars, real estate, luxury items, equity, and even consumer goods, as compared to the previous year.

Rising Inflation

Supply chain issues — including the Russia–Ukraine war and the spread of the Omicron variant in China — led to an increase in the prices of raw materials like natural gas, edible and crude oil, semiconductors, and so on, many of which are imported from these regions to India. This, combined with falling interest rates on loans and the resulting boost in consumption, led to high inflation levels. These developments tightened purse strings, as the common man ended up shelling out more on necessities like vegetables and petrol, as well as electronics. Since January 2022, Consumer Price Index inflation has exceeded the Reserve Bank of India’s upper tolerance threshold of 6%. As a measure to control inflation, the RBI decided to hike interest rates, and introduced other changes, resulting in the all-India inflation rate falling to 6.77% in October 2022.

An Unsteady Market

2022 was certainly not a year where people earned massive gains from the markets, which saw volatility due to rising inflation in the USA and the UK, the Russia–Ukraine war, and the continuing impact of the pandemic. The market crash between April and June resulted in many investors — especially those who invested for the short term — booking losses, while long-term investors who managed their finances mindfully were able to break even. In India, as inflation increased, the market witnessed more drawdowns. In the USA, interest rates rose, which meant that foreign investors pulled out of Indian markets and instead invested in US markets — selling investments in Indian equity worth over ₹4 lakh crore between June 2021 and July 2022. This further weakened the Indian rupee, while the dollar rose in value. On the bright side, many Indian companies filed — and continue to be filing — IPOs, and growth is projected in sectors like IT, cement, infrastructure, and FMCG.

The Soaring US Dollar

Globally, the US Dollar Index shot up — implying that the dollar is getting stronger. In India, where the value of the rupee against the US dollar reached an all-time low of ₹83.29 in October, the most glaring impact has been on the price of imported goods, including crude oil. But the appreciation of the US dollar has also affected the portfolio of Indian investors, pushing short-term traders to either exit the market or suffer a loss. There’s good news too — IT and pharmaceutical companies in India, which earn the major chunk of their revenue from foreign countries, will benefit from the rising value of the dollar.

The pandemic has inspired many to start investing more and planning for emergencies and retirement more proactively. With greater awareness, curiosity, and accessibility for money management, we believe that there’s a lot to look forward to in the realm of personal finance.

Discover your MoneySign®

Identify the personality traits and behavioural patterns that shape your financial choices.