Inflation is the reason a number twenty years out means less than it looks. This prices the same basket in future rupees, and reads a future amount back into what it can actually buy today.
Assumptions last reviewed 20 August 2026
What ₹1,00,000 buys today will cost ₹3,20,714 in 20 years at 6% inflation. Prices multiply 3.21 times.
Held as cash for 20 years, ₹1,00,000 loses 68.8% of what it can buy, leaving ₹31,180of today’s purchasing power.
India's CPI target is 4%, with a tolerance band of 2% either side
This page makes no return assumption and projects no investment. It applies one constant inflation rate you choose, which real inflation does not obey.
| Year | What it costs | What the cash is worth | Value lost |
|---|---|---|---|
| today | ₹1.00 L | ₹1.00 L | 0.0% |
| 5 | ₹1.34 L | ₹74,726 | 25.3% |
| 10 | ₹1.79 L | ₹55,839 | 44.2% |
| 15 | ₹2.40 L | ₹41,727 | 58.3% |
| 20 | ₹3.21 L | ₹31,180 | 68.8% |
One compounding relationship, read from both ends. Forward: cost = amount × (1 + r)^n. Backward: worth = amount ÷ (1 + r)^n, where r is the annual rate as a decimal and n is the number of years.
The two are the same fact seen from opposite sides. Saying that prices triple over twenty years at 6% and saying that a rupee loses 69% of its purchasing power over the same period are one statement, and the chart draws both lines so the symmetry is visible rather than asserted.
Percentage of value lost is 1 − 1/(1+r)^n, which is why it can never reach 100% however long the horizon: money keeps losing a share of what is left rather than a share of what it started with.
It applies one constant rate, and inflation is not constant. India’s headline CPI has moved between roughly 3% and 7% over the past decade, and the years cluster rather than alternate.
Your inflation is not the headline number. CPI weights a national basket. A household spending heavily on school fees, medical care or domestic help experiences a materially higher rate than one spending mostly on food and fuel, and no published index is calculated on your basket.
It says nothing about what to do. This page prices a basket; it does not model any investment, carries no return assumption, and cannot tell you what would have kept pace.
About ₹31,180 of today’s purchasing power, at 6% inflation. Put the other way round, what ₹1 lakh buys today will cost ₹3.21 lakh in twenty years. Both statements describe the same 3.21 times multiplier.
Over twenty-five years it is worse: ₹1 lakh holds about ₹23,300 of today’s value, and the basket costs ₹4.29 lakh. The loss accelerates because compounding works on the reduced amount each year.
6% is the working assumption across this suite. The Reserve Bank of India’s statutory target is 4% CPI inflation with a tolerance band of 2 percentage points either side, so 6% sits at the top of the band rather than outside it.
Using 4% for a long personal plan tends to understate the target, because the basket a household actually buys, weighted towards services, education and healthcare, has run ahead of the headline index. Using 8% or more overstates it for general spending, though not for education.
It sets the bar every return has to clear before anything has been gained. A deposit paying 7% against 6% inflation is not earning 7% of purchasing power a year, it is earning about 0.94%, because the two compound rather than subtract: (1.07 ÷ 1.06) − 1. That is the real return, and it is the only one that buys anything. Tax comes off before that calculation, not after, which is why a fixed deposit in the 30% bracket can lose real value while showing a gain.
A nominal return is the number on the statement. A real return is what is left after inflation. The rule most people use is to subtract one from the other, which is close enough at low rates and wrong at high ones: 12% nominal against 6% inflation is a real return of about 5.66%, not 6%. Every calculator in this suite carries a today’s-money view for exactly this reason.
The headline figure is the Consumer Price Index, published monthly by the National Statistical Office, which tracks the price of a fixed basket of goods and services weighted by average household spending. There is also a Wholesale Price Index, which measures prices at the producer level and moves differently. When an Indian news report quotes an inflation figure without qualification it is normally CPI.
More than any other assumption, because it compounds twice: once between now and the day you stop working, and again through every year of retirement. Moving the assumption from 6% to 7% raises a typical retirement target by roughly a third. The retirement calculator models both stages and lets you test that directly.
Because each year takes a share of what remains rather than of the original. At 6%, a rupee is worth 94 paise after one year, then 94% of that, and so on. The value approaches zero without arriving: 69% is gone after twenty years, 77% after twenty-five, 90% after forty. This is the same reason a portfolio that falls 50% needs a 100% gain to recover.
About ₹31.2 lakh of today's purchasing power at 6% inflation. To hold ₹1 crore of today's value in twenty years you would need ₹3.21 crore of that year's rupees.
The Reserve Bank of India's statutory mandate is 4% CPI inflation with a tolerance band of 2 percentage points either side, so 2% to 6%. The framework was adopted in 2016 and reaffirmed since.
It is the top of the RBI's tolerance band and a common working assumption for Indian personal finance. For general household spending it is conservative in a good decade and about right across a long one. For education costs it is too low.
Divide rather than subtract: (1 + nominal) ÷ (1 + inflation) − 1. A 10% return against 6% inflation is a real return of about 3.77%, not 4%. Take tax off the nominal return before doing this, not after.
That is a question about asset allocation and about your own horizon, and it is not one this page can answer. It prices a basket and makes no return assumption of any kind. What has historically outpaced Indian inflation over long periods, and what is appropriate for a given goal, are separate questions worth taking to the desk.
No. It applies one constant rate that you choose, which is the right tool for planning and the wrong one for measuring the past. Real inflation arrives in clusters, and no year matches the average.
Talk to the desk
Knowing that your target triples over twenty years is the useful half. What to hold so that it keeps pace, and how much of the answer depends on the horizon rather than the instrument, is the conversation worth having. Bring your figures and we will start from those.
