Inflation erodes the purchasing power of money over time — the same rupee buys less in the future than it does today. This calculator uses the inverse of the compound interest formula to show how much your current money will be worth in the future after accounting for inflation.

How the calculation works

Future Value = Present Value / (1 + r)^t

Where:
Future Value = Purchasing Power of Money after t years
Present Value = Current Amount
r = Annual Inflation Rate (as decimal)
t = Time Period (in Years)

Value Lost = Current Amount - Future Value

A quick example

Let us see how inflation affects your savings:

Current Amount:₹1,00,000

Average Inflation Rate:6% (India average)

Time Period:10 years

Step by step

1.Annual inflation factor = 1 + 0.06 = 1.06
2.Cumulative inflation over 10 years = 1.06^10 = 1.7908
3.Future Value = 1,00,000 / 1.7908
4.Future Value ≈ ₹55,839
5.Value Lost = 1,00,000 - 55,839 = ₹44,161

So the answer is: Future Value (Purchasing Power) = ₹55,839 | Value Lost to Inflation = ₹44,161 (44%)

Frequently Asked Questions

What is the average inflation rate in India?

India's average inflation rate has been around 5-6% over the past decade. It varies year to year based on economic conditions, monsoon, and global commodity prices.

How does inflation affect my savings?

If your savings earn less than the inflation rate, your purchasing power decreases. For example, at 6% inflation, ₹1 lakh today will be worth only about ₹55,000 in 10 years.

What is a good investment to beat inflation?

Equity investments (mutual funds, stocks) have historically returned 12-15%, beating inflation. PPF (7.1%), real estate, and gold also help hedge against inflation over the long term.

What is the real rate of return?

Real rate of return = Nominal return - Inflation rate. If your FD gives 7% and inflation is 6%, your real return is only 1%. This calculator helps you understand true purchasing power.

Why should investors track inflation?

Inflation directly impacts your investment goals. A retirement corpus of ₹5 crore today may be worth only ₹1.5 crore in 20 years at 6% inflation. Always factor inflation into long-term financial planning.