Inflation, the silent tax on your savings
Why ₹1 lakh today will feel like ₹31,000 in twenty years, and how to plan so your money keeps up.
Inflation doesn’t take money out of your account. It quietly makes every rupee in it buy less. At 6% a year, which is close to India’s long-run average, prices double roughly every 12 years.
What 6% inflation does
- Something that costs ₹100 today will cost about ₹240 in 15 years.
- ₹1 lakh kept as cash will buy what ₹42,000 buys today after 15 years, and what ₹31,000 buys after 20.
- A household spending ₹50,000 a month today will need about ₹2.1 lakh a month to live the same way in 25 years.
Some costs rise faster. School and college fees, and hospital bills, often grow 8–10% a year. A ₹1.5 lakh yearly school fee today could be about ₹5.5 lakh in 15 years at 9%.
Your real return
What matters is how much faster your money grows than prices:
real return ≈ your return − inflation
| Where the money sits | Typical return | Real return at 6% inflation |
|---|---|---|
| Savings account | 2.5–3% | about −3% (shrinking) |
| Fixed deposit (before tax) | 6.5–7% | about +1% |
| PPF (tax-free) | 7.1% | about +1% |
| Equity funds (long-term) | 10–12% | about +4–6% |
FD interest is also taxed at your slab rate, so after tax, an FD can barely keep up with prices.
How to plan around it
- Always plan in future rupees. A goal that costs ₹25 lakh today won’t cost ₹25 lakh in 15 years. Every Zarth goal tool grows today’s price by inflation first.
- Keep only near-term money in safe places. Emergency funds and money needed within 3 years belong in FDs or liquid funds.
- Let long-term money grow faster than prices. That usually means equity for goals more than 7 years away.
See what anything will cost later with the inflation calculator, or check whether your retirement plan accounts for it in the retirement calculator.