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Key Takeaways:
So, you saved ₹10,000 five years ago. What do you think you will still have the same spending power today? Sadly NO. Due to rising prices, today's ₹10,000 is much less than it was five years ago.
To monitor such details, an inflation calculator refers to the historical Consumer Price Index (CPI) data. This CPI helps you adjust the value of money over time. This CPI comes from official sources such as MoSIP in India.
A Consumer Price Index Calculator, with the help of these CPI numbers, helps you understand the real value of your money across different years. Comparatively, the rupee inflation calculator shows how the INR has changed over time. On the other hand, the inflation calculator prepares for future expenses and savings.
In India, the MoSIP releases monthly Consumer Price Index Data. With the help of this data, the inflation calculator adjusts your nominal amount and gives you the real value of money.
Do you know Ananya? No, not Ananya Pandey. Probably not, now she’s going to explain to you how an Inflation Calculator works.
“Hello, I am Ananya. I am 29 years old and have been living in Bengaluru since December 2017, and working as a software engineer.
Back in January 2018, I got my first salary, which was ₹30,000 in hand. Are you kidding? ₹30,000 back then felt so unreal. I started daydreaming about building my own house and taking my parents on a world tour. Fast forward to today, I am still earning ₹30,000, and to be honest, sometimes I struggle to even pay my bills now.
I am so confused and frustrated right now, from dreams to struggles, how did this all happen so quickly? My rent increases, groceries cost more, even transportation and utilities are higher in 2026, but why?”
We all can relate to Ananya, ain’t we? She feels like her money doesn’t go as far as it used to back in 2018, and she is absolutely right about it. Let’s see what actually happened here:
Read More - How Inflation Reduces Your Savings
As per the official CPI data published by MoSPI, India’s CPI has increased over the past few years. Let me explain to you in a simple way.
Let’s calculate how much ₹30,000 of 2018 would be in 2026, adjust for inflation calculator, which is what it means. Using this basic CPI formula, you can calculate it very easily:
Adjusted Value = (CPI in Later Year/ CPI in Earlier Year) x Original Amount
For Ananya- ₹30,000 x (141.6/121.1) = ₹35,085
This means that for the same amount of goods and services, Ananya would need ₹35,085 in the current year, i.e., 2026. Previously, the same was covered under ₹30,000.
Meanwhile, globally, inflation calculator tools such as the Bank of England inflation calculator and the US inflation calculator are used. These dollar inflation calculators use official data from the UK ONS and the U.S. Bureau of Labor Statistics (BLS).
Bonus Tips: Before using an online inflation calculator, always make sure that the calculator uses official CPI information from the MoSIP. If not, then don’t 100% rely on that information and double-check it.
Let’s assume that you want to check how much ₹20,000 from 2015 will be worth in 2025. Here is how you can calculate using the inflation calculator India:
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In 2025, the value of ₹20,000 from the year 2015 has increased to ₹32,070 as per the official CPI. This shows us exactly how inflation has reduced purchasing power over the years.
Remember, Ananya told us her story and how her fairytale became a nightmare in just a few years? We are not going to let that happen to you. If she had adjust for inflation calculator, she might have avoided that future.
But not every calculator can be trusted, so which one should we rely on? Here are some pointers that you should cross-check before using an inflation calculator:
An inflation calculator is not just a tool to check your money’s worth. It is actually a smart way of understanding how money can change its value over a period of time. An inflation calculator gives you clarity when you are planning for the future, comparing past prices, or just understanding your purchasing power.
Just like Ananya, probably you are also confused about how money can do everything in one minute and nothing in another. This is a world where the value of money constantly fluctuates and can directly affect your savings, salary, expenses, and purchasing power.
If you are someone who is struggling with the same, then you should definitely consider the inflation calculator today and check what your money is actually worth.
How is inflation calculated by economists?
Most of the economists typically use CPI as an index to calculate inflation. They check the average of goods and services over time to see how prices have increased.
Why has the inflation calculation changed over time?
Inflation calculations can change over time to reflect consumer behaviour, new products, and information collection methods.
Should I use inflation calculators to determine my target retirement income decades from now?
Yes, you can consider using an inflation calculator. This tool is going to help you understand how much the expenses may rise in the future.
Do you calculate inflation on your FIRE number?
When you are planning for your FIRE, you must consider inflation. It is going to help you prepare for the upcoming expenses.
Why doesn't the inflation calculator match the "real world" prices I see?
The inflation calculator relies on CPI for calculation. The CPI can not mirror your personal spending habits and daily expenses; that is why the prices may differ in real life.
