Inflation Calculator

An inflation calculator calculates the effects of inflation on the cost of a specific category of goods or services.

Inflation is defined as the increase in the price of a basket of goods and services. It is usually calculated for a particular product, sector, or the economy as a whole. It indicates the degree to which the purchasing power of the rupee may fall.

Inflation is usually calculated in two forms:

• Consumer price index (CPI), i.e. change in price levels at the retail level experienced by the end consumer.
• Wholesale price index (WPI), i.e. change in price levels at the wholesale level.

An inflation calculator is a free tool that is used to understand the difference in the cost of a good or service today compared to a few years later. It helps in financial planning for both the long and short term.

In order to use the inflation calculator online, simply visit the Angel One inflation calculator page. Then enter the following values:

1. Current cost
2. Rate of inflation
3. Time period

The calculator will automatically give you the future cost of the product(s), indicating the increase in the cost of the product.

For example, if a product costs Rs. 90,000 today. Assume an annual inflation rate of 4% for the next 5 years. To calculate the future cost of the product:

1. Enter current cost as Rs. 90,000
2. Enter the inflation rate as 4%
3. Enter the time period as 5 years

The online inflation calculator will give the future cost of the product as Rs. 1,09,499, indicating an increase in the cost by Rs. 19,499 over 5 years.

1. An inflation calculator helps you calculate a product's probable future cost compared to its present cost. It will help you make better financial decisions as you can prioritise your consumptions and investments based on their cost.
2. It is absolutely free to use as many times as you want to.
3. It is completely error-free, which may not be the case if you do all the calculations manually.
4. You can use the calculator from anywhere, anytime, as long as you have a device with an internet connection.

Since it is free, easy to use and accurate, it can be used to calculate the future cost of multiple products in a matter of minutes. This will help you compare various consumption levels, especially future ones.

Suppose you have Rs. 10 lakh as savings in a bank account that gives you a 2% interest rate. However, the inflation rate stays at 8% annually for the next 5 years. Therefore, the real value of your savings falls by 6% every year.

This is because the basket of goods that Rs. 10 lakh can buy today will require Rs. 14,69,328 at the end of 5 years. At a 2% growth rate, you will have only Rs. 11,04,080 at the same time 5 years later. Therefore, 5 years later, your purchasing power will only be around 75.14% of what it is today under these circumstances.

Therefore, it is clear that inflation causes a fall in the purchasing power of your savings unless you park your savings in investments that give a rate of interest higher than the rate of inflation.

Overcoming the negative impact of inflation requires careful financial planning, including choosing the right investments.

In order to combat the negative effects of inflation on your purchasing power, you may take the following steps:

1. Try to find a rough estimate of what the level of inflation is going to be in the next few years.
2. Then, create a portfolio of investments that have an expected rate of return that is higher than the inflation rate in the same period.
3. This involves making sure that not only the rates of interest received are high enough, but also the level of risk is low enough to minimise the downside.
4. The portfolio may thus be diversified into a range of investments in stocks, mutual funds, debt, gold, etc.

Before investing in high returns instruments, make sure that you have done adequate research on them. Also, choose a trusted broker who can aid you in your investment journey.