How this calculation works
See two different effects of the same inflation assumption: the future cost of something priced today, and the purchasing power of a fixed sum kept for that many years. Future cost rises while purchasing power falls; neither result is an investment forecast.
Worked example
This example uses illustrative inputs. Your current result is shown above.
Enter ₹1,00,000, 10% annual inflation and 2 years. The price factor is 1.10² = 1.21, so future cost is ₹1,21,000. An unchanged ₹1,00,000 would buy what ₹82,644.63 buys today, and cumulative inflation is 21%.
Assumptions and limits
- The same inflation rate compounds every year.
- Purchasing power assumes the money earns no interest and receives no additions.
- Your specific expenses may rise at rates different from a broad inflation index.
Questions people ask
Why is two years at 10% not 20% inflation?
The second increase applies to a price already raised by the first increase. Multiplying 1.10 by 1.10 gives a total increase of 21%.
Which result should I use for a future purchase budget?
Use future cost when starting with today’s price. Use purchasing power when asking what an unchanged future cash amount would be worth in today’s prices.