Inflation is the quiet variable in every long-term financial plan. A number that looks substantial in twenty years often is not, and plans built on nominal figures routinely fall short for no reason other than ignoring this.
How to use the Inflation Calculator
- Enter the amount you want to evaluate
- Set an expected annual inflation rate — 5–6% is a common long-run assumption for India
- Set the number of years
- Read what that sum will actually buy at the end of the period
How quickly purchasing power falls
The formula is compound decay:
Future value = Present ÷ (1 + rate)^yearsAt 6% inflation, ₹1,00,000 today has the purchasing power of:
- ₹74,726 in 5 years
- ₹55,839 in 10 years
- ₹31,180 in 20 years
- ₹17,411 in 30 years
Over a thirty-year horizon — an ordinary retirement timeframe — money loses more than 80% of what it buys. A retirement corpus calculated in today's prices is therefore wrong by a factor of roughly five.
Nominal return is not real return
The number that matters is the real return: nominal return minus inflation.
A fixed deposit at 7% with inflation at 6% returns about 1% in real terms before tax — and after tax at a 30% slab, roughly −1.1%. The balance grows while the purchasing power shrinks.
This is the core argument for holding growth assets over long horizons. Not because equity is safe, but because an asset returning less than inflation guarantees a real loss, whereas a volatile one at least has a chance of a real gain.
Frequently asked questions
What inflation rate should I assume?
India's long-run CPI inflation has averaged roughly 5–6%. Use 6% for general planning. Note that education and healthcare inflate considerably faster, often 8–10%, so plan those separately.
How do I work out what I will actually need?
Take your requirement in today's prices and inflate it forward. ₹50,000 of monthly expenses today becomes about ₹2,87,000 a month in 30 years at 6% — that is the figure a retirement plan has to cover.
Does inflation affect all spending equally?
No. Headline CPI is an average across a basket. Education, healthcare and property have run well above it for years, while electronics have deflated. Your personal rate depends on what you actually buy.
How do I protect savings from inflation?
Hold assets that have historically outpaced it over long periods — equity, real estate, and inflation-indexed bonds. Cash and low-yield deposits reliably lose purchasing power over time.