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Inflation Calculator

Inflation is the reason a number in the future is not worth what it looks like. This shows both sides of that: what today’s money will cost later, and what a future amount is really worth in today’s terms.

Check the working

A worked example

A fixed case, for reference.

Take ₹1,00,000 and an assumed 6% inflation over 10 years.

  1. Compound the inflation factor

    (1.06)10=1.7908477(1.06)^{10} = 1.7908477

  2. Future cost of today’s basket

    1,00,000×1.7908477=1,79,084.771{,}00{,}000 \times 1.7908477 = 1{,}79{,}084.77

  3. Value of ₹1,00,000 received in ten years

    1,00,0001.7908477=55,839.48\frac{1{,}00{,}000}{1.7908477} = 55{,}839.48

What costs ₹1,00,000 today would cost about ₹1,79,085 in ten years. Equivalently, ₹1,00,000 received in ten years buys what ₹55,839 buys today — barely more than half. This is why a retirement target set in today’s rupees is usually far too low.

The formula

Future cost=A×(1+i)n\text{Future cost} = A \times (1 + i)^{n}

What today’s basket of goods will cost after n years.

Present value=A(1+i)n\text{Present value} = \frac{A}{(1 + i)^{n}}

What an amount received in n years is worth in today’s money.

What each symbol means

A
the amount today
i
the assumed annual inflation rate, as a decimal
n
the number of years

What this assumes, and where it stops

Assumptions

  • Inflation runs at the single rate you enter, every year, for the whole period.
  • The basket of goods you care about inflates at the same rate as the general index.
  • The rate is applied annually and compounds.

Limitations

  • Actual inflation varies year to year and is not knowable in advance. India’s CPI inflation has moved substantially within single decades.
  • Personal inflation differs from headline inflation. The published index is an average basket; if a goal is dominated by one kind of spending — education, healthcare, a home — the price of that thing is what matters, and it need not move with the average.
  • The model uses one rate for the whole period, which is a simplification of something that changes constantly.
  • This shows the erosion of purchasing power only. It does not model what your investments might earn against it.

What this calculator does

  • Calculates the future cost of something that costs a given amount today.
  • Calculates what a future amount is worth in today’s purchasing power.
  • Shows how much purchasing power survives over the period, as a percentage.

Common questions

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