Inflation Impact Calculator India — FY 2025-26

See how inflation erodes the real value of money over time. For India. Uses current FY 2025-26 data.

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Amount today

₹

The amount in today's value

Annual inflation rate (%)

India CPI: ~5–7%. US CPI: ~3–4% long-term.

Number of years

Inflation in India — Why Your Money Is Silently Shrinking

## India's inflation history India has experienced high inflation historically: - 2010–2014: CPI averaged 9–10% (food-driven) - 2015–2019: CPI moderated to 4–5% (RBI inflation targeting) - 2020–2024: CPI 5–7% range, with 2022 spike to 7.8% For retirement and long-term planning: use 6% average inflation. ## The savings account trap Most Indian savings accounts pay 2.5–3.5% interest. At 6% inflation, a savings account earns **negative real returns** of -2.5 to -3.5%. ₹10 lakh in a savings account loses ₹25,000–35,000 of real purchasing power every year. This is why: - Liquid funds (returning ~6.5–7%) at minimum should hold emergency cash - Long-term savings must be in equity or inflation-linked instruments ## What beats inflation in India **Consistently beats inflation:** - Equity mutual funds (Sensex CAGR ~14% over 30 years) - Real estate in major cities (long-term average 7–12%) - Gold (long-term ~11% CAGR in INR terms, but volatile) **Roughly keeps pace:** - PPF (7.1%) — slightly above long-term CPI target - EPF (8.15%) — beats CPI in most years - Senior Citizen Savings Scheme (8.2%) **Often lags inflation:** - Regular savings accounts (2.5–3.5%) - Small finance bank FDs (6–7%, after 30% tax: ~4.2–5%) - Traditional LIC endowment (4–5% effective IRR) ## Inflation-proofing your finances 1. Emergency fund in liquid fund, not savings account 2. Long-term wealth in equity (ELSS, index funds) 3. Debt portfolio in short-duration bond funds, not FDs (better post-tax)

Common questions — India

Why does inflation matter for savings?

If your savings earn less than inflation, you're actually losing wealth in real terms. A fixed deposit at 6.5% with 6% inflation gives you a real return of only 0.5%. Over 20 years, this barely preserves your purchasing power. To grow wealth, your investments must beat inflation after tax.

What is India's typical inflation rate?

India's Consumer Price Index (CPI) inflation has averaged 5–7% over the past decade, with occasional spikes above 8%. Food inflation runs higher (7–10%), while core inflation (excluding food and fuel) is lower. The RBI targets 4% CPI with ±2% tolerance band. For long-term planning, use 6% as a conservative assumption.

What is the Rule of 70?

The Rule of 70 is a mental math shortcut: divide 70 by the inflation rate (%) to get the approximate years for purchasing power to halve. At 7% inflation: 70/7 = 10 years. At 3.5% inflation: 70/3.5 = 20 years. It works because of logarithmic approximation — same math underlies the Rule of 72 for doubling investments.

How does inflation affect different assets differently?

Real assets (property, gold, commodities) tend to keep pace with or beat inflation over long periods. Financial assets (cash, fixed income) often lag inflation unless the yield is high enough. Equity markets over the long term have historically beaten inflation by 4–6% annually. This is why keeping too much in savings accounts (3.5% return vs 6% inflation) destroys real wealth.

What is "inflation tax"?

When the government runs a deficit and the central bank prints money to finance it, inflation increases. This silently reduces the real value of everyone's rupee holdings — a transfer of wealth from savers to borrowers (including the government). This is why some economists call inflation "the cruelest tax" — it hits everyone who holds cash or fixed-income savings.

Inflation Impact Calculator India — FY 2025-26

Inflation in India — Why Your Money Is Silently Shrinking

Common questions — India

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