# Inflation Calculator

The Inflation Calculator estimates purchasing power changes over time by comparing the value of money between two specific periods.

Current Cost

1K

1Cr

Rate of Inflation (p.a)

%

1%

10%

Time Period

Yr

1Y

30Y

Current Cost

₹0

Cost Increase

₹0

Future Cost

₹0

0

Current Cost

Total Inflation

Inflation refers to the general rise in prices over time. The result is that your purchasing power reduces as you have to pay more to buy goods and services. One needs to save and invest money wisely to beat inflation. This is where the inflation calculator comes into play. An inflation calculator like the one above will help you assess the impact of inflation on your savings and expenditure. Use the calculator to know the inflation-adjusted figure for your household expenditure 5 years into the future.

## What is inflation?

By definition, inflation measures the general price rise in an economy. In layman’s terms, what you can buy with ₹100 today will cost you ₹104 the following year if the prevailing inflation rate in the economy is 4%.

Inflation measures the price fluctuations for a pre-determined basket of goods and services. The rate of inflation is expressed in percentage terms.

## Inflation calculator explained

The inflation rate that you see on news channels is declared and monitored by the Reserve Bank of India every month. Calculating inflation is a complex process. A department under the Ministry of Statistics and Programme Implementation collects data every month to calculate the Consumer Price Index (CPI).

Since calculating the inflation number is complex, you won’t be able to do it yourself. Thankfully, the CoinSwitch calculator will help you measure the impact of inflation on your investments and expenses in the coming years. Knowing how your costs will increase in the coming years will help you save in a way that might help you beat inflation.

## How to use the inflation calculator

The inflation calculator is easy to use. You need to fill in the following details in the appropriate fields to get the inflation-adjusted number:

• The present value of your expenditure
• The inflation rate for the year
• The period for which you wish to check the impact of inflation

Let’s understand the impact of inflation on expenditure. Your current monthly household expense is ₹60,000 and the inflation rate in the economy is 5.5%. This means your inflation-adjusted expense for next year will be ₹63,300. This denotes the increase in your expenditure even if you maintain the same standard of living and do not incur any extra expenses.

Inflation can erode the value of your investments and increase your expenses over time. Knowing the impact of inflation on your expenditure can help you do financial planning and investments in advance. Here are some of the benefits of using an inflation calculator.

• Precise results

The inflation calculator will assess the impact of price rise on your expenditure and savings over the years. Moreover, it also minimizes the chances of human error so that you can plan how to protect your savings from inflation.

• Free to use

The CoinSwitch inflation calculator is free to use. All you need is an internet connection and you are all set.

• A time-saver

Calculating inflation-adjusted expenses and investments becomes complicated if you have to do it manually. The inflation calculator will do the job for you. All you need to do is key in the prompted variables and you will get the inflation number instantly.

• User-friendly

The calculator design is straightforward and intuitive, making it easy to use. Additionally, the numeric representation is such that it makes the interpretation of the derived number easy.

## Calculating inflation

The calculation of inflation numbers for a particular month is complicated. The Ministry of Statistics and Programme Implementation has an entire department dedicated to data gathering and calculation.

The current CPI basket has 260 commodities and services and 2012 is used as the base year to measure inflation.

### The formula for CPI calculation

The following formula is used to calculate the Consumer Price Index (CPI):

CPI = (Cost of Fixed Basket of Goods and Services in Current Year/ Cost of Fixed Basket of Goods and Services in Base Year) *100

### The formula to calculate inflation

The CPI numbers are used as input variables to calculate inflation. The inflation calculation formula is as follows:

Inflation = ((CPI x+1 – CPIx)/ CPIx))*100

Thankfully, you might never have to calculate inflation. The inflation numbers are declared every month. The inflation calculator above will help you derive inflation-adjusted numbers for your expenses and savings using the inflation data published by the RBI.

## Conclusion

Inflation is a necessary evil. It will reduce the purchasing power of money over time. Therefore, it is important to measure the impact of inflation on your expenses and savings to plan your finances efficiently. The inflation calculator above will help you calculate the inflation-adjusted expenditure for years to come.

## FAQs

1.What is price inflation?

Price inflation refers to the general price increase in the economy over time.

2.Can you define deflation?

The opposite of inflation is deflation. Deflation is the phase when prices are declining. During the deflationary phase, the purchasing power of money will increase but economic growth will be stunted.

3.What causes inflation?

Inflation is caused by a combination of factors such as changes in monetary and fiscal policy, increased spending by the central government, rise in production costs, etc. External factors such as wars, unrest, global demand or supply shocks, etc. can also impact inflation in an economy.

4.What are the different types of inflation?

Inflation is generally classified under three heads. They are: Demand-pull inflation Cost-push inflation Built-in inflation.