Inflation Calculator

Headline CPI inflation has long-term averaged around 5-6% per year, and the RBI targets 4% ± 2% — so most general-purpose long-horizon planning uses 6%. Category-specific inflation is very different: education and healthcare typically inflate at 8-12%, well above CPI, so college fees and hospital bills should be modeled at a higher rate. Use the headline 6% only when the cost you're modeling tracks the overall consumer basket; for narrow categories, use a category-specific rate.

Nominal return is the headline percentage your investment earned (e.g. 12% from an equity mutual fund). Real return is what you earned after subtracting inflation — the actual increase in your purchasing power. The Fisher approximation is real ≈ nominal − inflation, so a 12% nominal return at 6% inflation gives roughly a 6% real return (more precisely, (1.12 / 1.06) − 1 = 5.66%). Long-horizon planning should always use real returns; nominal returns alone overstate how much you can actually buy with your future corpus.

Engineering, medical, and management programme fees have historically risen 8-12% per year — well above the headline CPI of 5-6%. A ₹10 lakh undergraduate degree today, modeled at 10% inflation over 15 years, becomes roughly ₹41.8 lakh. Using the headline 6% rate would understate that target by nearly half (₹23.97 lakh). If you're saving for a child's college, always model at category-specific education inflation — not CPI. The same caution applies to private healthcare costs over a retirement horizon.

Three steps. First, project today's monthly lifestyle forward using a 6-7% inflation rate over your years to retirement — that's the income you will need in the first year of retirement. Second, since you'll be drawing income for 25-30 years after that, the corpus needs to keep up with inflation through retirement too (a Systematic Withdrawal Plan with annual step-up, or an inflation-linked annuity, handles this). Third, your investments should target a real return of at least 3-4% above inflation — that's a nominal 9-10% in a 6% inflation environment, generally achievable with equity-heavy portfolios over long horizons. For specific retirement planning, consult a SEBI-registered investment advisor.