Inflation and interest rates
Two numbers decide whether your savings grow or shrink. Who sets them, and why is yours not the one on the news?
Chapters
Beginner
- What inflation isNot "things got expensive". A measured change in the price of one specific basket of goods, over one specific period, for one specific population — and every word of that sentence is doing work.
- How India measures itField staff walk to 1,407 markets and 1,465 villages every week and write down prices. Everything else — the index, the headline, the policy decision built on it — rests on that, and the method is published in full.
- Your inflation and the numberIn September 2026 onion rose 108% and potato fell 11.5%, in the same country in the same month. The headline was 5.54%. Nobody experienced 5.54% — it is an average of experiences, and yours depends on what you buy.
Intermediate
- The target and the bandIndia does not aim at zero inflation. A committee of six aims at a number with a tolerance band around it, votes in public, and publishes the minutes with every dissent in them.
- The repo rate and your moneyOne committee sets one overnight rate, and it arrives in your loan statement months later having passed through three mechanisms. On 7th October 2026 they raised it for the first time in years, five days before seeing the data.
- Real returnEvery rate you are ever quoted is nominal. Subtract inflation and then tax, in that order, and a respectable-looking deposit turns into a slow loss — which is the only reason any of the preceding five chapters matter.