EconomicsBeginner
Inflation
The general rise in prices that reduces what each rupee can buy.
Detailed explanation
India tracks it mainly through the Consumer Price Index. Inflation is the reason a nominal return can still be a real loss: what matters is the return after inflation, not the number on the statement.
Formula
Real return ≈ ((1 + nominal return) / (1 + inflation)) − 1
Example
A 7% FD with 6% inflation gives a real return of only about 0.94% before tax.
Why it matters
Every long-term goal — education, retirement, a home — must be sized in future rupees, not today's.
Key points
- Erodes the value of cash and fixed-income holdings.
- Drives RBI's interest rate decisions.
- Personal inflation, especially healthcare and education, can exceed the headline figure.
Related tool
Inflation calculatorRelated terms
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Educational content only. Definitions and examples are illustrative and are not investment, tax or legal advice.