Inflation

Inflation is how fast prices go up. A little inflation is normal, but it quietly eats the value of cash sitting idle, which is why money you do not need soon should be somewhere it can grow.

Why it matters even when prices creep

A single year of mild inflation feels harmless, but it compounds like interest in reverse. At around 6% a year, prices roughly double in about twelve years, so what ₹100 buys today may need ₹200 in just over a decade. Cash left in a drawer, or in an account paying less than inflation, slowly loses purchasing power even though the number on it never falls. That silent erosion is the real reason to invest rather than hoard.

Real return is what counts

The return you actually gain is your return minus inflation, called the real return. A fixed deposit paying 7% when inflation is 6% gives a real return of only about 1%, before tax. This is why a “safe” option can quietly lose ground: if the after-tax return trails inflation, your money grows on paper but shrinks in what it can buy. The aim is to beat inflation over time, not just to see a bigger number.

Planning around it

Inflation is why long-term goals need growth assets like equity, not just deposits, and why the cost of a goal years away is higher than it looks today. Future costs are worth estimating in both today’s money and tomorrow’s. Learn the full idea in inflation, and try your own numbers in the inflation calculator.