Guides / Inflation: Why ₹1 Lakh Will Not Buy the Same Things

Inflation: Why ₹1 Lakh Will Not Buy the Same Things

Inflation is the steady rise in prices. It means the same money buys less every year.

A 20-year example at 6% inflation

Use the Inflation Calculator to see the effect on your own amounts.

Where inflation hurts most

• Education and healthcare often rise faster than average.
• Savings in low-interest accounts, if the rate is below inflation.
• Fixed incomes, such as a pension that does not rise.

What you can do

1. Aim for returns above inflation over the long term, with a mix of assets that suits your risk level.
2. Invest regularly, and increase the amount each year.
3. Plan goals in future prices. Use the Goal SIP Calculator with a target that already includes inflation.
4. Do not keep large amounts idle, beyond your emergency fund.

A note on real returns

If your FD earns 7% and inflation is 6%, your real return is only about 1%, before tax. After tax it may be zero or negative.