Complete guide
Reviewed July 2026Inflation is the slow, silent tax on money: as prices rise, each rupee buys a little less. A sum that feels comfortable today can be badly inadequate in twenty years, and a 'safe' investment that fails to beat inflation quietly loses value even as its balance grows. Understanding inflation is the difference between planning in real terms and fooling yourself with big nominal numbers.
This calculator works both directions. It shows the future cost of something that costs a certain amount today, and it shows the shrinking purchasing power of a fixed sum held over time. Enter an amount, an inflation rate and a number of years to see both effects.
Below: the formula and variables, worked examples, why inflation is the enemy of cash and low-yield deposits, the real-vs-nominal distinction that trips up most savers, and the mistakes that lead to under-planning for the future.
How inflation is calculated
Future cost = Present cost x (1 + i)^n Purchasing power = Present amount / (1 + i)^n i = annual inflation rate (decimal) n = number of years
Inflation compounds exactly like interest, but works against you. To find what something will cost later, grow today's price by (1 + i) each year. To find what a fixed sum will be worth later in today's money, discount it by the same factor. The two are mirror images of the same compounding.
Worked examples
- Future cost: monthly expenses of Rs 50,000 today, 6% inflation, 20 years: 50000 x (1.06)^20 = Rs 1,60,357/month.
- Purchasing power: Rs 10,00,000 held as cash, 6% inflation, 20 years: 1000000 / (1.06)^20 = Rs 3,11,805 in today's money - it loses about 69% of its value.
- College fee inflation: Rs 5,00,000 today at 10% education inflation in 15 years: 500000 x (1.10)^15 = Rs 20,88,624.
- The rule of 70: prices double in about 70/inflation years - at 6%, roughly every 12 years.
Why inflation is the enemy of cash
Money left idle - in a current account, a low-interest savings account or under the mattress - loses purchasing power every year. Even a deposit that pays interest can lose ground if its post-tax return is below inflation. The real return, not the nominal number, is what actually grows your wealth.
| Inflation | 10 years | 20 years | 30 years |
|---|---|---|---|
| 4% | Rs 67,556 | Rs 45,639 | Rs 30,832 |
| 6% | Rs 55,839 | Rs 31,180 | Rs 17,411 |
| 8% | Rs 46,319 | Rs 21,455 | Rs 9,938 |
Using this calculator
- Enter today's amount - an expense, a goal, or a sum you plan to hold.
- Set an inflation rate; long-run general inflation has often run 5-7% in India, but education and healthcare inflate faster (8-12%).
- Choose the number of years.
- Read both the future cost and the today's-money purchasing power to plan goals in real terms.
Common mistakes
- Planning retirement or goals in today's rupees, then finding the target badly short decades later.
- Judging investments on nominal returns and ignoring whether they beat inflation after tax.
- Using general inflation for education or healthcare, which historically rise faster.
- Assuming cash is 'safe' - it's safe from market swings but guaranteed to lose purchasing power.
- Forgetting that a fixed pension or annuity loses real value every year unless it's inflation-linked.
Frequently asked questions
Glossary
- Inflation
- The rate at which the general price level rises, reducing money's purchasing power.
- Purchasing power
- How much a sum of money can actually buy, which inflation erodes.
- Nominal value
- The face amount of money, ignoring inflation.
- Real value
- Value adjusted for inflation - true purchasing power.
- Real return
- (1 + nominal return) / (1 + inflation) - 1; the inflation-adjusted growth.
- Rule of 70
- Years for prices to double is about 70 / inflation rate.
- CPI
- Consumer Price Index - a common measure of inflation from a basket of goods.
- Inflation-indexed
- An instrument whose payouts rise with inflation, protecting real value.
Key takeaways
Inflation compounds against you: future cost = today x (1 + i)^n, and purchasing power = today / (1 + i)^n. At 6%, prices double roughly every 12 years and cash loses about two-thirds of its value over 20. Judge investments on real (post-inflation, post-tax) returns, plan goals in real terms by inflating today's expenses to the target year, and use faster rates for education and healthcare. Beating inflation, not just growing a nominal balance, is what builds real wealth.
Enter an amount, inflation rate and horizon above to see both the future cost and today's-money value; then re-plan any long-term goal in real terms.