The formula
Future cost = today’s cost × (1 + inflation)years
At 6% inflation, something that costs ₹1,00,000 today will cost about ₹1,79,085 in 10 years and ₹3,20,714 in 20 years. Put the other way, ₹1 lakh in 10 years will buy what ₹55,839 buys today.
Which rate to use
- General household costs: 5–6%, close to India’s average CPI inflation.
- School and college fees: often 8–10% a year.
- Healthcare: 8–12% a year.
Why it matters
A savings return below inflation loses buying power. An FD at 7% taxed at 30% earns about 4.9% after tax, below 6% inflation. That is why long-term goals usually need some equity, through a SIP.
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Questions people ask
What is the current inflation rate in India?
Retail (CPI) inflation is published monthly by the statistics ministry; over the last decade it has mostly ranged between 2% and 7%. For planning, 6% is a common long-term assumption.