How inflation is calculated
Example: monthly household expenses of ₹1,00,000 today will cost ₹1,79,085 after 10 years and ₹3,20,714 after 20 years at 6% inflation. Looked at the other way, ₹1 crore kept in a locker for 20 years will buy only what ₹31 lakh buys today.
Future cost = Today’s cost × (1 + inflation rate)^years Future buying power = Amount ÷ (1 + inflation rate)^years
Inflation in India
| Expense | Typical yearly inflation | ₹10 lakh today becomes (15 years) |
|---|---|---|
| General household (CPI) | 5% – 6% | ₹21 – 24 lakh |
| School and college fees | 8% – 10% | ₹32 – 42 lakh |
| Hospital and medical | 8% – 12% | ₹32 – 55 lakh |
| Rent in big cities | 6% – 8% | ₹24 – 32 lakh |
India’s consumer price inflation has averaged around 5% to 6% over the past decade, with the RBI targeting 4% (plus or minus 2%). But the inflation that matters to you depends on what you spend on. Education and healthcare costs have been rising 8% to 10% a year, far faster than the headline number. Use a higher rate for those goals.
How to beat inflation
- Keep only emergency money in savings accounts and FDs. After tax, their return is often below inflation.
- For goals more than 5 years away, invest in equity mutual funds through SIPs. Equity has beaten inflation by 5% to 7% a year over long periods.
- Increase your SIP every year with a step up so your investments grow with prices.
- Use inflation-adjusted targets. A ₹1 crore retirement goal set today is worth far less in 25 years; our retirement calculator does this adjustment for you.
Frequently asked questions
What inflation rate should I use for planning?
Use 6% for general living expenses in India, 8% to 10% for education and healthcare, and 2% to 3% for the US or Europe. When in doubt, use a slightly higher number to be safe.
What is the real rate of return?
It is the return after removing inflation. Roughly, real return = nominal return − inflation. A 7% FD during 6% inflation gives a real return of about 1%, and less after tax.
How much will ₹1 crore be worth in 20 years?
At 6% inflation, ₹1 crore after 20 years will have the purchasing power of about ₹31 lakh today. You would need ₹3.2 crore then to match ₹1 crore today.
Does this calculator work for other countries?
Yes. Select your currency and enter the inflation rate of your country. The formula is universal.
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View allDisclaimer: This calculator is for information purposes only. Results are estimates based on the inputs you provide and do not guarantee any returns. Please consult a qualified financial advisor before making investment or tax decisions.