Inflation is the rate at which the general level of prices for goods and services rises over time, causing each unit of currency to buy fewer goods and services than before. It is typically measured annually as a percentage using indexes like the Consumer Price Index (CPI), and it affects everything from grocery bills to long-term savings and investment planning.

How does inflation affect savings?

Inflation erodes the purchasing power of money held in savings over time. If your savings earn a lower interest rate than the inflation rate, the real value of that money actually decreases even though the account balance grows. For example, ₹1,00,000 sitting idle at 6% average inflation will only buy what roughly ₹74,700 buys today after 5 years, which is why beating inflation is a key goal of long-term saving and investing.

How is inflation calculated?

Inflation's future impact is calculated using the formula: Future Value = Current Amount × (1 + Inflation Rate)^Years. This shows how much money you would need in the future to have the same purchasing power as a given amount today. Real-world inflation rates are calculated by statistical agencies by comparing the change in a fixed basket of goods and services (CPI) between two time periods.

Why should investors care about inflation?

Investors need their returns to outpace inflation, or their real wealth actually shrinks even as account balances rise. A fixed deposit earning 6% during a period of 7% inflation results in a negative real return of about -1%. This is why investors compare CAGR and SIP returns against expected inflation when planning for long-term goals like retirement or a child's education.

Can inflation reduce wealth?

Yes. Inflation reduces real wealth whenever the growth rate of your assets is lower than the inflation rate, even if the nominal amount of money you hold increases. Cash and low-yield savings accounts are especially vulnerable, since their value is fixed in nominal terms while prices around them keep rising, which steadily shrinks what that money can actually buy.

Investment Growth & Performance

Inflation Calculator — Future Purchasing Power (2026)

Calculate the future value of your money after inflation and see exactly how much purchasing power it will lose over time. Enter an amount, inflation rate, and time period to find out.

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Savers, investors & planners

Inflation Calculator

Enter your details below to see how inflation will affect your money's value.

Current Amount (₹)

The amount of money you have today

Inflation Rate (% per year)

Expected average annual inflation rate

Years

Number of years into the future

Results

Future Amount Needed (same purchasing power)

₹179,085

Real Value of Today's ₹100,000 in the Future

₹55,839

Purchasing Power Lost

44.16%

At 6% average inflation, you would need ₹179,085 in 10 years to buy what ₹100,000 buys today.

Now that you know inflation's impact, here's what to do next:

Plan investments that beat inflation

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Check your real annual growth rate

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What is Inflation?

Inflation is the rate at which the general level of prices for goods and services rises over time. As prices go up, each unit of currency buys fewer goods and services than it did before — in other words, the purchasing power of money declines. Inflation is typically measured annually as a percentage using indexes like the Consumer Price Index (CPI).

A small, steady amount of inflation is considered normal and even healthy for a growing economy. But over long periods — 10, 20, or 30 years — even moderate inflation compounds significantly, quietly eroding the value of cash savings, fixed deposits, and any investment that doesn't grow faster than the inflation rate itself.

Use the Inflation Calculator above to see exactly how much your money's purchasing power will shrink over time, or explore related tools like our Compound Interest Calculator to see how your savings could grow instead.

Inflation Formula

The standard formula used to project the future cost of money under inflation.

Future Value = Current Amount × (1 + Inflation Rate) ^ Years

Current Amount = The value of money today

Inflation Rate = Expected average annual inflation, as a decimal (e.g. 6% = 0.06)

Years = The number of years into the future

Worked Example

Future Value = 1,00,000 × (1 + 0.06)^10 = ₹1,79,085

At 6% average inflation, you would need ₹1,79,085 in 10 years to buy what ₹1,00,000 buys today — a purchasing power loss of about 44%.

Understanding Purchasing Power

Purchasing power is what your money can actually buy — and inflation steadily reduces it.

Nominal Value

The face value of money — the number printed on the note or shown in your bank balance. Nominal value doesn't account for inflation, so it can be misleading when comparing amounts across different time periods.

Real Value

The actual purchasing power of that money after adjusting for inflation. Real value tells you what an amount can genuinely buy, which is why it's the number that matters for long-term financial planning.

To find the real value of a future amount in today's terms, divide it by (1 + inflation rate)^years. For example, ₹1,00,000 kept as cash for 10 years at 6% inflation will only have the real purchasing power of about ₹55,839 today — even though the number on the note hasn't changed. This is why beating inflation matters more than simply preserving the nominal amount.

Examples

Real scenarios showing how inflation changes the cost of money over time.

Retirement Planning

A monthly expense of ₹50,000 today, at 6% inflation over 20 years, will cost:

50,000 × (1.06)^20

≈ ₹1,60,357 per month

Child's Education

A course costing ₹10,00,000 today, at 8% education inflation over 15 years, will cost:

10,00,000 × (1.08)^15

≈ ₹31,72,169

Idle Cash Savings

₹5,00,000 kept in a low-interest account for 10 years at 6% inflation loses real value to:

5,00,000 / (1.06)^10

≈ ₹2,79,197 in today's terms

Short-Term Goal

A ₹2,00,000 wedding expense budgeted today, at 6% inflation over 3 years, will cost:

2,00,000 × (1.06)^3

≈ ₹2,38,203

Why Inflation Matters

For Savers

Cash and low-yield savings lose real value every year inflation runs ahead of the interest earned
Long-term goals need to be budgeted in future, inflated terms — not today's prices
Emergency funds still need some growth to avoid quietly shrinking in real terms

For Investors

Real returns matter more than nominal returns — a 6% return during 7% inflation is a real loss
Asset allocation should account for inflation risk over multi-decade horizons
Comparing CAGR or SIP returns against expected inflation reveals true wealth creation

Related Financial Tools

Explore other calculators to plan investments that outpace inflation.

Frequently Asked Questions

Answers to common questions about inflation and purchasing power.

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