Question 1

What is inflation?

Accepted Answer

Inflation is the rate at which the general price level of goods and services rises over time, reducing the purchasing power of money. India's CPI inflation has averaged 5-6% per year over the last decade.

Question 2

Why does inflation matter for investors?

Accepted Answer

If your investment returns are lower than inflation, you are losing real wealth even as your account balance grows. For example, if your FD earns 7% and inflation is 6%, your real return is only about 0.94% per year.

Question 3

What is the real return formula?

Accepted Answer

Real Return = ((1 + Nominal Return) / (1 + Inflation Rate)) - 1. This is the Fisher equation. For example, 12% nominal return with 6% inflation gives a real return of 5.66%, not 6% as simple subtraction would suggest.

Question 4

What inflation rate should I use for long-term planning?

Accepted Answer

For general expenses, 6% is a reasonable assumption for India. For specific categories: education 8-12%, healthcare 10-14%, food 5-7%. This calculator lets you set any rate to model different scenarios.

Year	You Need	Today's Value
Year 1	₹10.60 L	₹9.43 L
Year 2	₹11.24 L	₹8.90 L
Year 3	₹11.91 L	₹8.40 L
Year 4	₹12.62 L	₹7.92 L
Year 5	₹13.38 L	₹7.47 L
Year 6	₹14.19 L	₹7.05 L
Year 7	₹15.04 L	₹6.65 L
Year 8	₹15.94 L	₹6.27 L
Year 9	₹16.89 L	₹5.92 L
Year 10	₹17.91 L	₹5.58 L

Inflation Calculator

Purchasing Power Over Time

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