Inflation Calculator

Inflation Calculator

Present Value

₹

Inflation Rate

%

Years

Yr

Present Value

This is the Money you have today

Cost Increased

Future Value

After Years, you will need rupees to buy something which costs 1,00,000 rupees today

Real value after

If Rupees is not invested anywhere, its value will erode by every year, and its purchasing power after years will be in today's terms.

Real Value

Cost Increased

Future Value

0.00

Nowadays inflation impacts everyone by reducing the value of money over time, meaning that what you can buy with the same amount of money decreases, and in the case of an asset there is depreciation. So for this, there is a tool named as Inflation Calculator.

What is Inflation?

Inflation is a rise in the price level of goods and services that are required for the day to day uses so it indicates a fall in the purchasing capacity of the rupees, so there are mainly 2 measures of inflation:

• Wholesale Price Index (WPI)
• Consumer Price Index (CPI)

Here the Wholesale Price Index calculates the Wholesale level changes in the price, and the Consumer Price Index calculates the retail level change in price. You can calculate your inflation by  using this formula,

Inflation = {(Consumer Price Index X+1  - Consumer Price IndexX)} X 100

How to prepare to overcome Inflation?

Here inflation is a constant factor in the economy, so the government tries to manage it with fiscal policies, some risks and effects cannot be fully controlled, so this is why individuals need to prepare this in advance to deal with inflation.

So by making this smart investment and having a financial plan that offers a higher return than inflation, you can protect your money value, so the interest in the stock and the mutual fund provide a good return.

Over time, these returns are usually higher than the rate of inflation, so it is important to remember that these types of investments always carry the risk and it can sometimes to lead losses.  

So to manage this risk this is a good idea to diversify your investments, by choosing the right mix of investments that offer a strong return over time, so you can potentially deal with inflation without facing major financial difficulties.

What is an Inflation Calculator?

An inflation calculator is a tool that shows how the value of money changes over time due to its rising prices, so it helps you to see how much money from the past is worth today or how much money you will need in the future to buy the same things. 

For example, if you bought an asset for INR 50000 in the year 2000, an inflation calculator can tell you how much that same amount of money is worth today in 2024  consider how the prices have gone up over the 24 years and that is  1,31,55.80 as the Inflation rate at that time was 4.1%.

The formula for the Inflation Rate 

Inflation calculators use the information from the Consumer Price Index (CPI), as this shows how the price of common goods and services changes over the period, so by looking at the Consumer Price Index for two different years the calculator figures out how much prices have gone up or down due to inflation and then adjust the value of money to reflect the changes.

Here is the basic formula which is used by the inflation Calculator:

“Inflation Rate = Consumer Price Index in Current Year - Consumer Price Index in Previous Year / Consumer Price Index in Previous Year”

Here is the calculator which adjusts the value of money over two years by using the following formula:

“Adjusted Value = Consumer Price Index (CPI) for 1990/ Consumer Price Index (CPI) for 2024 X Original Value”

Example of Inflation Calculation

Let’s the Consumer Price Inder in 2023 is 305.5 and in 2020 260, then you have to find the inflation rate between these two years, so you have to use the formula:

Now, by using the formula for calculating the inflation rate:

“Inflation Rate = Consumer Price Index in Current Year - Consumer Price Index in Previous Year / Consumer Price Index in Previous Year”

Inflation Rate = 305.5 -260 / 260 X 100

= 45.5 /260 X 100

=17.5%

So, the inflation rate between 2020 to 2023 is 17.5%

Now there is another scenario where you have to compare the cost of a house in 1990 vs. today. Imagine that you are interested in how much a house bought in 1990 for INR 1,00,000 would be worth in today’s  Indian rupees, which are adjusted for inflation. Here you can use an Inflation calculator to make this comparison.

So here we have to find the consumer price index, where you will need CPI data from 1990 and the current year so let’s assume it’s 2024, by using official government sources like the U.S. Bureau of Labor Statistics, here you find:

• Consumer Price Index (CPI) for 1990 = 150.7
• Consumer Price Index (CPI) for 2024 = 310.5

Now, by using the formula for calculating inflation-adjusted value:

“Adjusted Value = Consumer Price Index (CPI) for 1990/ Consumer Price Index (CPI) for 2024 X Original Value”

Adjusted Value = 310.5/ 150.7 X 1,00,000 

= 2,06,038.49

So the house was bought for INR 1,00,000 in 1990 would be equivalent to approx 2,06,039 in 2024 in terms of purchasing power it is adjusted for inflation.

Inflation Rate in India for the last year

Here the given below table which is represents the Indian inflation rate from 2013 to 2023:

Impact of Inflation on Saving

Well, let’s understand how inflation impacts your savings by using the cost of a product or service. Today the expense of child education is INR 20,00,000, so this rate will foreshore change with the inflation.

So if there is an inflation of 6%, that means you will have to save another 6% for your child's education, with this inflation rate, the cost of education in the next Ten years will be INR 35,81696. So with inflation, saving money is important to fight inflation.

Also, Check - SIP Calculator

Benefits of Inflation Calculator

Here are the given  below benefits of using an inflation calculator:

• Precise Output and Result: This helps to assess the potential worth of money in the future, and it furnishes the worth of the same money if the money is invested somewhere. So the historical rates are used by the inflation calculator to calculate the precise results.
• Time-saving: In India, it requires a few seconds to deliver the results, so it saves time and this is much more convenient than manual calculations.
• Free to use at Ease: The RetirewithRohit inflation calculator is free to use and you can use it to run calculations multiple times.
• Simple to use: In India, it is fairly easy to operate, and an individual just has to enter the money amount to calculate the purchasing power of the same in the coming years.