Inflation is an indicator of the rate of price change when compared to a specific category of goods over a particular period. Inflation signifies the elevation in the prices of goods/services that denotes a fall in purchasing capacity.
Inflation is a rise in price levels of goods/services that are required for day-to-day use. It primarily indicates the fall in the purchasing capacity of the rupee.
There are mainly 2 measures of inflation-
The Wholesale Price Index (WPI) calculates the wholesale-level changes in price, and Consumer Price Index (CPI) calculates the retail-level changes in price.
Every investor makes his savings and investments with the sole intent of growing their money with time so that they can fulfil and fund their provisions and financial necessities in future.
Though every investor plans to save effectively, certain external factors like inflation may affect savings by a considerable margin. Inflation influences the prices of goods and services, ultimately diminishing an individual's purchasing power.
Investors usually save their finances in bank accounts to keep earning interest, but at times, such interest may not be of much use to balance out the inflation effects. Also, it is often observed that the impact of inflation principally depends on the type of investment one opts to make. The returns on such investments may vary from time to time depending on the altitude of the inflation.
Inflation has an inevitable presence in the economy. Though the government attempts to control it via fiscal policies, certain risks and effects are beyond its control. Hence, an individual must prepare well in advance to combat inflation conditions.
With careful investments and effective financial planning that offers inflation-beating returns, one can achieve so. For example, investing in stocks and mutual funds provide reasonable returns. It has been observed over the years that the returns from such investments have been higher than the inflation rate. However, it is important to note that the risk associated with these investments can also lead to incurring losses.
Therefore, by diversifying the portfolio and picking the right basket of investments that provide substantial returns in the long term, one can potentially expect to endure inflation without much hardship.
An inflation calculator calculates the effect of inflation on purchasing power and capacity of an individual. It primarily indicates the worth of a quantity of money after a certain period. The inflation adjustment calculator even helps estimate the worth of the same amount of money if it is invested.
Inflation is calculated by using Consumer Price Index. It measures the change in the price of goods and services by taking a weighted average value of each.
CPI = (Cost of Fixed Basket of Goods and Services in Current Year/ Cost of Fixed Basket of Goods and Services in Base Year) *100
Note that inflation can be calculated using the formula once the CPI for the two years is calculated.
Inflation can be measured by using Consumer Price Index (CPI)
Inflation = ((CPI x+1 – CPIx)/ CPIx))*100
Note: CPIx is the Initial Consumer Price of the Index
The following are the chief benefits of using an inflation calculator-
Groww's inflation calculator is free to use and can be used to run calculations multiple numbers of times.
This inflation calculator INR helps to assess the potential worth of money in the future. It also furnishes the worth of the same money if it is invested somewhere. Historical rates are used by the inflation calculator to calculate the precise results.
The inflation calculator in India is fairly easy to operate. An individual just has to enter the money amount in order to calculate the purchasing power of the same in the forthcoming years.
The inflation-adjusted calculator in India requires a few seconds to deliver results. It saves time and is much more convenient than manual calculations.