Why inflation matters for every financial plan
Inflation steadily reduces what a rupee can buy. At India's long-run consumer inflation of about 6%, prices double every 12 years, so a ₹1 lakh expense today will cost ₹1.79 lakh in 10 years and ₹3.21 lakh in 20. Education and healthcare costs have risen even faster, at 8–12% a year. This calculator converts between today's and future rupees and shows how your investment return compares after inflation.
Formulas
- Future cost = Today's amount × (1 + inflation)years
- Present value = Future amount ÷ (1 + inflation)years
- Purchasing power of ₹100 after n years = 100 ÷ (1 + inflation)n
- Real return (Fisher) = (1 + nominal return) ÷ (1 + inflation) − 1
Worked example
A college course costing ₹10,00,000 today at 8% education inflation will cost ₹21,59,000 in 10 years. If you expect a ₹1 crore retirement corpus in 25 years and inflation averages 6%, it is worth only ₹23.3 lakh in today's money. An FD at 7% while inflation is 6% gives a real return of just 0.94% — before tax; after 30% tax the real return is negative.
Using the modes
- Future cost of today's amount — for goal planning: how much will the wedding, house or education cost when the time comes.
- Today's value of a future amount — to judge whether a projected corpus or insurance sum assured is actually adequate.
The year-wise table shows the future cost, present value, purchasing power and cumulative inflation for each year, and the chart plots the trend.
Which inflation rate to assume
- General expenses: 5–6% (RBI target band 2–6%)
- Education: 8–10%
- Healthcare: 10–12%
- Rent and property: 5–8% depending on city
- Lifestyle upgrades: add 1–2% on top of CPI
Planning with a slightly higher inflation assumption than you expect is safer: it leads you to save a little more, which rarely hurts.
Frequently Asked Questions
What inflation rate should I use for India?
6% is a reasonable long-term average for general expenses; use 8–10% for education and 10–12% for medical costs.
What is real rate of return?
The return after removing inflation: (1 + nominal) ÷ (1 + inflation) − 1. It tells you whether your wealth is actually growing in purchasing power.
How long until prices double?
About 72 ÷ inflation rate years: 12 years at 6%, 9 years at 8%. The calculator shows the exact doubling time.
Why does a ₹1 crore corpus feel small in 25 years?
Because at 6% inflation it buys only what ₹23 lakh buys today. Always plan goals in today's rupees and inflate them.
Disclaimer: This tool is for general information and estimation only. Tax rates and rules change — verify with official sources or a professional before acting. Read full disclaimer.