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Inflation Calculator

See how inflation erodes your purchasing power over time.

Amount you have or plan to spend today
Average inflation in India: 5-7%
How many years in the future

Inflation Impact

Enter your details to see inflation impact.

Understanding Inflation & Purchasing Power

Inflation is the rate at which prices of goods and services increase over time. It silently erodes your purchasing power - the same amount of money buys less as time goes on. For example, what costs ₹100 today might cost ₹160 in 10 years at 5% inflation. Understanding inflation is crucial for long-term financial planning, retirement, and investment decisions.

Purchasing Power Loss

Your money loses value each year. ₹1 Lakh today becomes ₹55K in real value in 10 years at 6% inflation. That's ₹45K lost without doing anything!

Time Amplifies Impact

Longer time periods mean bigger inflation impact. 6% over 10 years = 79% purchasing loss. Over 30 years = 83% loss. Start planning early!

Real vs Nominal Returns

FD at 5% return with 6% inflation = -1% real return (losing money). You need returns exceeding inflation to grow wealth. Equities provide 12-15% nominal returns = 6-9% real.

Planning Requirement

Retirement corpus, education costs, major purchases - all must account for inflation. This calculator reveals how much more you'll need to maintain the same lifestyle.

Inflation Impact on Different Expenses

Different items inflate at different rates. Healthcare inflates faster than average!

Expense Category Typical Inflation Rate Impact (10 years) Impact (20 years)
Food & Groceries 7-9% p.a. ~96% increase ~383% increase
Healthcare 8-10% p.a. ~115% increase ~485% increase
General/Average 5-7% p.a. ~63-97% increase ~165-306% increase
Education 6-8% p.a. ~79-116% increase ~220-366% increase
Housing/Rent 5-7% p.a. ~63-97% increase ~165-306% increase

Healthcare inflation is the fastest - critical for retirement planning! Use 8-10% for healthcare costs.

Real-World Inflation Examples

Example 1: Monthly Household Expenses

Scenario: Your household spends ₹50,000/month today

At 6% inflation:

  • In 5 years: ₹67K/month needed (34% increase)
  • In 10 years: ₹89K/month needed (79% increase)
  • In 20 years: ₹1.6L/month needed (220% increase)
  • In 30 years: ₹2.87L/month needed (474% increase)
Example 2: Child's Higher Education Cost

Scenario: Child born today, college starts in 18 years

Today's cost: ₹20L for 4-year degree

At 7% education inflation:

College cost in 18 years: ₹65L (225% increase)

Start saving ₹25-30K/month in education funds, not ₹10K as old estimates suggest!

Example 3: Retirement Planning with Inflation
Years to Retirement Today's Corpus Needed Inflation-Adjusted Corpus Increase Factor
5 years (6% inflation) ₹50L ₹67L 1.34x
10 years (6% inflation) ₹50L ₹89L 1.79x
20 years (6% inflation) ₹50L ₹1.59L 3.21x
30 years (6% inflation) ₹50L ₹2.87L 5.74x

Key insight: A 30-year plan requires 5.7x the corpus compared to today! Start saving early.

Inflation Calculation Formula

Formula:
Future Value = Present Value × (1 + Inflation Rate)^Years

Where inflation rate is expressed as decimal (6% = 0.06)

Step-by-Step Example:

Problem: Your monthly expenses are ₹50,000. What will they be in 15 years at 6% inflation?

Step 1: Identify values

  • Present Value (P) = ₹50,000
  • Inflation Rate (R) = 6% per year = 0.06
  • Years (T) = 15 years

Step 2: Apply formula

  • FV = 50,000 × (1.06)^15
  • FV = 50,000 × 2.3966
  • FV = ₹1,19,830

Result: Your ₹50K monthly expense becomes ₹1.2L in 15 years. You'll need 2.4x more money for the same lifestyle!

Frequently Asked Questions

Inflation is the rate at which prices of goods and services increase over time. It matters because: (1) Your money loses purchasing power - ₹100 today buys less tomorrow, (2) Impacts retirement planning - your expenses grow each year, (3) Affects savings - 0% inflation-adjusted returns mean you're losing money, (4) Influences investment decisions - you need returns above inflation to grow wealth. Example: 6% inflation means your ₹10L costs become ₹18L in 10 years.

Use the formula: Future Value = Present Value × (1 + inflation rate)^years. Example: If today's expenses are ₹50K/month at 6% inflation for 10 years: FV = 50K × (1.06)^10 = ₹89.5K/month. This calculator automates this for you. Key points: (1) Higher inflation = faster purchasing power loss, (2) Longer time periods = larger impact, (3) Small differences in rates compound significantly, (4) This helps you calculate retirement corpus and education costs.

India's average inflation rate historically ranges from 5-7% per year, though it varies: (1) Recently (2022-2024): 5-7% range, (2) Historical average: 5-6% per year, (3) RBI target: 4% ± 2%, (4) varies by category - food inflation often higher than fuel. For planning: Use 6% as conservative estimate for long-term. Check RBI's latest inflation target for current outlook. Different assets inflate differently - food/healthcare faster than general inflation. This calculator helps you plan using your expected inflation assumption.

Inflation significantly impacts retirement corpus needs: (1) If you need ₹50K/month today, you'll need ₹1.6L/month in 20 years at 6% inflation, (2) Inflation increases your corpus requirement by 25x (4% rule), (3) Your savings must earn returns above inflation to grow real wealth, (4) Ignoring inflation leads to retirement shortfalls. Example: ₹1 Cr corpus at 5% inflation loses 40% purchasing power in 20 years. Strategy: Invest to earn 2-3% above inflation (8-9% total), invest in growth assets when young, and plan retirement corpus accounting for inflation.

Inflation erodes returns - what matters is real return, not nominal: (1) Nominal return: What you earn (e.g., 10%), (2) Inflation: Price rise (e.g., 6%), (3) Real return: Actual wealth growth (10% - 6% = 4%), (4) FD at 5% in 6% inflation = -1% real return (losing money!). Examples: (1) Savings account 3% - 6% inflation = -3% real (losing), (2) Stock market 12% - 6% inflation = 6% real (growing), (3) FD 6% - 6% inflation = 0% real (no growth). To beat inflation: Invest in instruments returning 2-3% above inflation. Inflation Calculator helps you understand the purchasing power loss if you don't invest properly.

No, different categories inflate at different rates: (1) Food & groceries: 7-9% (often higher), (2) Healthcare: 8-10% (fastest inflation), (3) Utilities & fuel: 6-8%, (4) Housing: 5-7%, (5) Entertainment/Education: 6-7%. Impact: Your healthcare costs double in ~7 years while general inflation might double in ~12 years. Planning tip: (1) Use higher rates (8-10%) for healthcare in retirement, (2) Calculate separately for major categories, (3) Healthcare cost inflation is critical in retirement, (4) Food costs rise faster than average. This calculator uses average inflation - adjust rates for specific expense categories in retirement planning.

Strategies to combat inflation erosion: (1) Invest for returns above inflation - equity provides 12-15% average returns, (2) Real estate - physical assets tend to keep pace with inflation, (3) Inflation-linked bonds - directly indexed to inflation, (4) Gold - historically inflation hedge (though volatile), (5) International diversification - different countries, different inflation. Best approach: (1) Young investors - aggressive portfolio (80% stocks), (2) Mid-career - balanced (60% stocks, 40% bonds), (3) Pre-retirement - conservative (40% stocks). Rule: If earning 6% and inflation is 6%, you're losing purchasing power. Earn 8-10%+ to stay ahead. SIP in mutual funds provides good inflation-beating returns.

Ignoring inflation leads to serious financial shortfalls: (1) Retirement corpus falls short - you calculated ₹1 Cr but need ₹2 Cr in real terms, (2) Education funding gap - college fees triple while you saved for doubled cost, (3) Lifestyle reduction - planned ₹50K/month becomes inadequate, (4) Risk of working longer than planned. Real example: Retire with ₹1 Cr at age 60. Without inflation planning, by age 70 with 6% inflation, it's worth only ₹55L in real terms. At age 80: ₹30L real value. Solution: Always calculate required corpus using inflation-adjusted expenses. Use 6% inflation in India unless stated otherwise. Review and adjust contributions annually. This Inflation Calculator shows purchasing power loss - use it to motivate proper financial planning.
Quick Tips
  • Always account for inflation in long-term planning
  • Different expenses inflate at different rates (healthcare fastest)
  • Investments must earn 2-3% above inflation to grow wealth
  • Small inflation differences compound massively over time
  • Review assumptions annually and adjust retirement plans
  • Real estate and equities historically beat inflation
Disclaimer

This calculator is for educational purposes only. Results assume constant inflation rates, but actual inflation varies by: (1) Category (food vs healthcare), (2) Economic conditions and government policies, (3) Time period and regional factors, (4) External shocks and events. Past inflation doesn't guarantee future rates. Always consult a financial advisor for personalized planning.

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