Real value of rupees over time.
Future cost (same lifestyle)
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Real value of that amount later
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Your breakdown
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Two questions, one formula
Inflation does two things to money, and this tool answers both with the same compounding maths. The first result, future cost, tells you how many rupees you will need years from now to buy what one rupee buys today, computed as amount times (1 plus inflation) raised to the number of years. The second, real value, runs the formula in reverse to show what a fixed sum will actually be worth once prices have risen, dividing by the same growth factor. The first is the number that matters for goal planning; the second is the sobering one for anyone holding idle cash.
Which rate to type in
The Reserve Bank of India targets headline CPI inflation of 4%, with a tolerance band of 2% to 6% under its flexible inflation-targeting mandate. Headline CPI has spent much of the recent period in the 4 to 6% zone. For planning I would not use 4%. The inflation that actually hits an urban household, school fees, hospital bills, eating out, domestic help, runs noticeably hotter than the headline basket, which is weighed down by items you do not buy every month. A 6% assumption for general expenses is sensible, and I nudge clients to model education and healthcare goals separately at 8 to 10%.
What 10 lakh becomes over 20 years
Suppose your household runs on 10 lakh a year today and you want to know what the same lifestyle costs after 20 years at 6%. The factor is 1.06 to the power 20, which is about 3.207.
The same lifestyle will cost about 32.07 lakh a year, more than triple. Flip it around: 10 lakh stuffed under the mattress today will buy only 3.12 lakh worth of goods in 20 years. The curve below traces the rising cost.
The rule of 72, and why your FD might be losing
A quick mental check: divide 72 by the inflation rate to get the years it takes for prices to double. At 6%, that is 12 years; at 9%, just 8. The same rule warns you about real returns. A fixed deposit paying 7% sounds safe, but after 6% inflation and tax on the interest, the real return can slip close to zero or below for someone in the 30% bracket. Beating inflation, not just earning a headline rate, is the whole point of investing in equity, equity mutual funds, or even PPF over very long horizons.
Is this the same as the cost inflation index used for capital gains?
No, and it is a useful distinction. The Cost Inflation Index notified by the tax department is a separate, government-set series used only to index the purchase cost of certain assets when computing long-term capital gains. Note that for most assets sold on or after 23 July 2024 the Budget removed indexation in favour of a flat 12.5% rate, so the CII now matters mainly for older property and specific transition cases. This calculator uses your own assumed CPI rate for everyday planning, which is the more practical tool for retirement and goal maths.
Should I plan retirement on real or nominal numbers?
Plan in today’s rupees, then inflate the target. Decide the lifestyle you want now, use this tool to find its future annual cost, and size your retirement corpus against that inflated figure. A corpus that looks generous at today’s prices can fall short badly once 25 years of 6% compounding is applied to your expenses.