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How to use the inflation calculator
- 1Enter an amount in today's money.
- 2Enter the inflation rate you want to assume.
- 3Enter the number of years.
- 4Read the future cost, the eroded present value, and the percentage lost.
Compounding, pointed the other way
Inflation uses the same formula as compound interest, and that is the most useful thing to understand about it. At 6% a year, prices multiply by 1.06 every year, so what costs ₹100 today costs ₹179 in ten years and ₹321 in twenty. Nothing about that is linear, and intuition consistently underestimates it.
The mirror image is what happens to money you hold. ₹1,00,000 kept in a current account is worth about ₹55,800 in purchasing power after ten years at 6% — you still have the same rupees, and they buy roughly half as much. The calculator shows both directions, because they are the same fact stated twice and people find one or the other more intuitive.
The rule of 72 is a useful shortcut here: divide 72 by the inflation rate to get the years for prices to double. At 6%, twelve years. At 8%, nine. It works for compound growth in either direction, which is exactly why the same shortcut is used for investment returns.
The number that decides whether you are actually saving
A return is only a return if it beats inflation. A fixed deposit paying 7% while inflation runs at 6% is earning you 1% in real terms — and after tax at a 30% slab, the post-tax return is 4.9%, which is a real-terms loss of about 1.1% a year. The money grows in rupees and shrinks in what it can buy.
This is the single most important thing an inflation calculator is for. Comparing the nominal return on any product against the inflation rate — and then against the after-tax nominal return — is what separates saving from the appearance of saving. It is also the argument for equity exposure over long horizons that no amount of caution really answers: instruments that cannot beat inflation after tax are guaranteed to lose purchasing power, slowly and invisibly.
Note that the tax is levied on the nominal return, not the real one, which makes the effect worse than it first appears. You pay tax on gains that merely kept pace with prices.
Choosing a rate, and why yours differs from the official one
India's Consumer Price Index inflation has generally run between 4% and 7% over the last decade, and the Reserve Bank targets 4% with a two-point tolerance band either side. Somewhere around 6% is a reasonable long-run planning assumption.
But the headline CPI is a basket weighted for average consumption, and your basket is not average. Education and healthcare in India have inflated far faster than the index — frequently 8–10% a year — while electronics have deflated. If you are projecting a child's college fees or a retirement healthcare budget, using headline CPI will understate the target substantially. Use a rate that matches the thing you are actually buying.
This is why goal-based planning should run at goal-specific inflation. A retirement corpus, an education fund and a house deposit face three different inflation rates, and treating them as one number is the most common error in long-horizon planning.
Planning against it
The practical response has three parts. First, hold long-horizon money in assets that have historically outpaced inflation — which over decades has meant equity, not deposits. Second, increase your contributions over time rather than leaving them flat; the step-up SIP calculator on this site models exactly that, and it is the mechanical answer to a target that keeps rising.
Third, state goals in future rupees rather than today's. A ₹20 lakh education target set today is a ₹51 lakh target in fifteen years at 6%, and higher still at education-specific inflation. Planning to the smaller number guarantees a shortfall that only becomes visible when it is too late to fix.
For money already at rest, the same logic sets a floor: any instrument returning less than inflation after tax has a negative real return, and holding cash beyond a genuine emergency buffer is a slow, certain loss rather than a safe choice.
Frequently asked questions
What inflation rate should I use?
Around 6% is a reasonable long-run assumption for India, and the Reserve Bank targets 4% with a two-point band. But use a goal-specific rate where the goal warrants it — education and healthcare have inflated at 8–10%, far above headline CPI.
How long until prices double?
Divide 72 by the inflation rate. At 6%, about twelve years; at 8%, about nine. The same shortcut works for investment growth.
Is a 7% fixed deposit beating 6% inflation?
Barely before tax, and not after it. At a 30% slab, a 7% deposit returns 4.9% post-tax against 6% inflation — a real-terms loss of about 1.1% a year. Tax is charged on the nominal gain, not the real one.
What is the difference between nominal and real return?
Nominal is the number quoted; real is what is left after inflation. A 10% nominal return with 6% inflation is roughly a 4% real return, and only the real figure tells you whether your purchasing power grew.
Should I plan goals in today's rupees?
No — inflate them. A ₹20 lakh education goal is about ₹51 lakh in fifteen years at 6%, and more at education-specific inflation. Planning to today's figure guarantees a shortfall.
Is anything uploaded?
No. The calculation runs entirely in this browser tab.