Inflation has a direct effect on financial security. High inflation reduces purchasing power and damages long-term savings. Money saved for long-term objectives like retirement or education gradually loses value due to rising living expenses.
Simply put, inflation is the gradual increase in everyday products and services costs. This implies that you can now purchase less with your current money. For instance, you might observe that the price of food, petrol, and clothing rises when inflation is strong, and your income or savings may not go as far as they formerly did. In essence, inflation devalues money, making it more difficult to purchase the same items later on.
Inflation Calculator helps you calculate the future value of money based on the Inflation rate. Eg You can calculate the value of ₹5, 10, 15 crores after 1, 3, 5 years, and 10 years based on the inflation rate, and simple formula.
The value after inflation is the current amount × (1−inflation rate/100) raised to the power number of years.
India's current inflation rate 6.21% will be used for this purpose.
Value = 50000000 x (1 – 0.06)
Value after inflation = 10000000×0.94 = 4,70,00,000
In simple terms: If inflation is 6%, your ₹5 crore will be worth ₹4.7 crore after one year.
Value = 50000000 x (1 – 0.06)^3
Value = 50000000 x 0.835216
Value = ₹4,17, 60,800
After 3 years, ₹1 crore will be worth ₹4.17 crore
Value = 50000000 x (1 – 0.06)^5
Value = 50000000 x 0.747258
Value = ₹3,73,62,900
In simple terms, If inflation is 6%, your ₹5 crore will be worth ₹3.7 crore after five years.
Value = 50000000 x (1 – 0.06)^10
Value = 50000000 x 0.4228
Value = 2,11,40,000
In simple terms, If inflation is 6%, your ₹5 crore will be worth ₹2.1 crore after ten years.
Suppose you want to reach your retirement target of ₹5 crore in 10 years. In that case, considering inflation, you must modify your savings to ensure that the future value of ₹5 crore equals its current value.
Formula: Future Value = Present Value × (1 + Inflation Rate) ^ Number of Years
Present Value: ₹5 crore (your target retirement corpus)
Inflation Rate: 6% or 0.06
Number of Years: 10
Calculation:
FutureValue: 50000000×(1+0.06)10
FutureValue=5,00,00,000×(1+0.06) 10
FutureValue: 5,00,00,000×(1.06)10
FutureValue=5,00,00,000×(1.06) 10
FutureValue=5,00,00,000×1.7908≈8,95,40,000
With a 6% inflation rate, you must save about ₹8.95 crore over ten years to reach your retirement target of ₹5 crore in today's currency.
Due primarily to rising food costs, retail inflation in October surged to a 14-month high of 6.21%, above the Reserve Bank's upper tolerance level. Consumer pricing index (CPI)-based inflation was 5.49 percent in September and 4.87 percent in the same month last year.
Following its most recent monetary policy review in October, the RBI maintained the key short-term lending rate at its current level, citing inflationary worries.
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