Inflation quietly halves your money's buying power roughly every 12 years at 6%. See exactly what your rupees will buy — and what things will cost — down the line.
The two faces of inflation
Every inflation question is one of two directions. Forward: an expense of ₹1,00,000 today will cost about ₹2,39,656 in 15 years at 6% — relevant when sizing future goals like education, weddings or retirement. Backward: ₹1,00,000 you receive 15 years from now will buy only what about ₹41,727 buys today — relevant when judging maturity values of insurance policies, FDs and pension plans. Both numbers come from the same formula, applied in opposite directions.
Formulas
Future cost = P × (1 + i)n · Present value = P / (1 + i)n
Why this matters for your investments
- Judge every return in real terms. A 7% FD during 6% inflation grows your purchasing power just 1% a year — before tax.
- Long-dated promises need discounting. A policy maturing at "₹25 lakh after 25 years" is worth about ₹5.8 lakh in today's money at 6% inflation.
- Salary and rent negotiations below the inflation rate are real-terms pay cuts.
- Goal planning must inflate first. Use this calculator to convert today's costs to future costs, then feed that into the SIP calculator to plan the investment.
Frequently asked questions
What inflation rate should I assume for India?
Headline CPI inflation in India has averaged around 5–6% over the past two decades, so 6% is a common planning assumption. Use higher rates for specific categories: education and healthcare costs have historically inflated at 8–10%.
What is the difference between future cost and present value here?
Future cost answers "what will today's ₹1 lakh expense cost in n years?" (multiply by (1+i)^n). Present value answers "what will ₹1 lakh received in n years be worth in today's terms?" (divide by (1+i)^n). Both appear in the results because both directions matter in planning.
How fast does money lose half its value?
Divide 72 by the inflation rate: at 6%, prices double (and money halves) roughly every 12 years; at 8%, every 9 years. Over a 30-year retirement at 6% inflation, prices rise almost 6-fold — which is why keeping savings in cash guarantees a loss of purchasing power.
What return do I need to beat inflation?
Your investments must earn more than inflation after tax. With 6% inflation, a 7% FD taxed at 30% yields just 4.9% — a real loss. Equity, real estate and inflation-linked instruments are the usual routes to positive real returns over long periods.
Is some inflation good?
Moderate, stable inflation (the RBI targets 4% ± 2%) is considered healthy — it encourages spending and investment and gives wages room to adjust. The planning problem is not inflation existing, but portfolios that ignore it.