Inflation Calculator
What today's money will be worth — and what today's expenses will cost — in the future.
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Future cost of same expense—
Prices multiply by—
Purchasing power left—
Value lost to inflation—
Two questions, one calculation
Inflation works in both directions, and this calculator shows both. Run forwards, it tells you what something costing a given amount today will cost in the future. Run backwards, it tells you what a sum of money set aside today will actually buy by then.
Both use the same compounding formula:
Future cost = P × (1 + r)t
Future purchasing power = P / (1 + r)t
A worked example
Take 10,00,000 and an assumed inflation rate of 6% over 15 years. Something costing 10,00,000 today will cost approximately 23,96,600 — prices multiply by nearly 2.4 times. Meanwhile, 10,00,000 held in cash for those 15 years will buy what about 4,17,300 buys today. You will still have 10,00,000; it will simply do less than half the work.
This is why holding large sums in a current account or a low-yield savings account is not the safe option it appears to be. Nothing is lost on the statement, and a great deal is lost in practice.
Real versus nominal returns
The number that actually matters for any investment is the real return — what is left after inflation:
Real return ≈ Nominal return − Inflation rate
A fixed deposit paying 7% while inflation runs at 6% delivers a real return near 1%. Factor in tax at a 30% slab and the after-tax return falls to about 4.9%, which is a real return of roughly minus 1%. The deposit grows every year and buys less every year at the same time. That combination is the strongest argument for holding long-horizon money in assets that have historically outpaced inflation, even accepting the volatility that comes with them.
Choosing a rate
India's consumer price inflation has generally run between 4% and 7% over the past decade, with the Reserve Bank targeting 4% within a tolerance band of two percentage points either side. For long-range planning, 6% is a reasonable working assumption.
Your personal inflation rate, though, may be quite different from the published figure. Education and healthcare costs have consistently risen faster than the headline index — often 8–10% annually. If you are planning for school fees or medical expenses specifically, use a higher rate than the general one.
Where this matters most
- Retirement planning. A corpus that looks comfortable in today's money may be inadequate in thirty years. Inflate your target spending before setting the number.
- Long-dated goals. A child's education cost eighteen years out should be planned at the inflated figure, not today's fee.
- Salary decisions. A 5% raise in a 6% inflation year is a pay cut in real terms.
- Fixed-income allocation. Guaranteed nominal returns are not guaranteed real returns, which is the central limitation of deposit-heavy portfolios over long periods.
Frequently asked questions
What inflation rate should I use for planning?
For general long-term planning in India, 6% is a reasonable working assumption — headline CPI has largely run between 4% and 7% over the past decade against an RBI target of 4% with a two-point tolerance band. Use a higher figure for education and healthcare costs, which have historically risen faster.
What is the difference between real and nominal returns?
Nominal return is the headline figure an investment pays. Real return is what remains after inflation, and it is what determines whether your purchasing power actually grew. An investment returning 8% during 6% inflation delivers a real return of roughly 2%.
Can inflation make a fixed deposit lose money?
In real terms, yes. A deposit paying 7% before tax, taxed at a 30% slab, nets about 4.9%. If inflation is running at 6%, purchasing power falls by roughly 1% a year even though the balance on the statement rises.
How does inflation affect retirement planning?
Substantially, because the horizon is long. Spending of 12,00,000 a year today would require roughly 51,50,000 a year in 25 years at 6% inflation. Retirement targets set in today's money without adjustment are usually far too low.
Is deflation possible, and what would it mean?
Sustained deflation is rare in India but has occurred elsewhere, notably Japan. It raises the purchasing power of cash but is generally associated with weak economic conditions, falling wages, and rising real debt burdens — which is why central banks treat it as a serious problem rather than a benefit.