Why inflation matters for every plan
Inflation is the steady rise in prices over time. At 6% a year, which is close to India's recent average, prices double roughly every 12 years. Money kept idle loses value, and any goal priced in today's rupees will cost much more when you get there.
Future cost = today's cost × (1 + inflation)^years
Today's value = future amount ÷ (1 + inflation)^yearsWorked example
Not everything inflates at the same rate
| Category | Planning rate |
|---|---|
| General household expenses | 5–6% |
| Healthcare and hospitalisation | 8–12% |
| Private school and college fees | 8–10% |
| Rent in big cities | 5–8% |
| Electronics and gadgets | Often flat or falling for the same features |
Official consumer inflation (CPI) is published every month by the National Statistics Office, and the RBI aims to keep it near 4%. Your personal inflation depends on what you spend on. Families with school fees and elderly parents often face higher inflation than the headline number.
Protecting yourself from inflation
- Aim for investments that earn more than inflation after tax. Equity funds have been the main long-term tool.
- Keep only emergency money and near-term goals in savings accounts and FDs.
- Plan goals in future rupees with the goal SIP calculator, and see the real value of your investments with the investment growth calculator.
Inflation and your salary
If your salary rises 5% while prices rise 6%, you're effectively taking a 1% pay cut each year. Use this calculator to see what your current salary needs to become in 5 or 10 years just to keep today's lifestyle, and use that figure when you negotiate a raise or compare job offers.
Frequently asked questions
What is India's inflation rate?
Consumer inflation has mostly been between 4% and 7% in recent years. The latest monthly figure is published by the National Statistics Office (MoSPI).
What inflation rate should I use for retirement planning?
6% is a common assumption for general expenses. Use 8–10% for healthcare and education goals.
Does an FD beat inflation?
Before tax, often barely. After tax in the 20–30% slabs, FD returns frequently fall below inflation.
Official references: MoSPI – Consumer Price Index · RBI