Inflation Calculator
Future Value: ₹0
Understanding Inflation:
Inflation reflects the rate of price change in a specific category of goods over time, signaling a decrease in purchasing power. It measures the rise in prices of goods and services crucial for everyday use, resulting in a reduced value of currency.
How Does Inflation Affect Your Savings?
Inflation impacts the purchasing power of the rupee, affecting the cost of goods and services. While investors aim to grow their money, inflation can erode the real value of savings. Diversifying investments, such as stocks and mutual funds, can potentially offer returns that outpace inflation.
How to Prepare to Overcome Inflation?
Effective financial planning and investments with inflation-beating returns are crucial to combat the impact of inflation. Diversifying the portfolio and selecting investments with long-term growth potential can help endure inflation without significant hardship.
What is an Inflation Calculator?
An Inflation Calculator assesses the effect of inflation on purchasing power over time. It estimates the future value of money, considering the impact of inflation. This tool helps individuals understand the potential worth of their money in the future and the impact of investing.
How is Inflation Calculated?
Inflation is calculated using the Consumer Price Index (CPI), which measures the change in the price of goods and services. The formula for inflation is (CPIx+1 – CPIx) / CPIx) * 100, where CPIx is the Initial Consumer Price Index.
Benefits of Inflation Calculator:
- Free to Use: Groww’s inflation calculator is free and can be used multiple times.
- Precise Output: Provides precise estimates of the future value of money, considering historical rates.
- Simple to Use: Easy operation, requiring the entry of the initial amount for calculations.
- Time-Saving: Delivers quick results, saving time compared to manual calculations.
FAQs
Inflation is typically calculated using the following formula:
Inflation Rate = ((Current Price Index – Base Price Index) / Base Price Index) * 100 Where:
Current Price Index = The current level of prices for a basket of goods and services Base Price Index = The initial level of prices for the same basket of goods and services
Price inflation refers to the general increase in the prices of goods and services over a period of time, leading to a decrease in the purchasing power of money. It indicates the erosion of the real value of money, as consumers need more money to purchase the same quantity of goods and services.
The primary causes of inflation include:
- Demand-pull inflation: Caused by increased demand for goods and services exceeding their supply, leading to upward pressure on prices.
- Cost-push inflation: Caused by rising production costs, such as labor or raw materials, which are passed on to consumers in the form of higher prices.
- Monetary factors: Excessive growth in the money supply relative to the growth in output can lead to inflation as more money chases the same amount of goods and services.
- Supply shocks: Sudden disruptions in supply, such as natural disasters or geopolitical events, can lead to shortages and higher prices for certain goods and services.
The types of inflation include:
- Demand-pull inflation: Caused by excess demand relative to supply.
- Cost-push inflation: Caused by increases in production costs.
- Built-in inflation: Resulting from expectations of future price increases, leading to wage-price spirals.
- Hyperinflation: Extreme and rapid inflation, often caused by excessive money printing or economic instability.
- Stagflation: Simultaneous occurrence of high inflation and stagnant economic growth.