Inflation indicates the rate of change in the cost of goods/services i.e.
the change in the purchasing capacity of the rupee.
Inflation calculator assists you in estimating the future cost of any goods/services. Inflation usually refers to the increase in the price or decrease in the purchasing capacity.
For example, at a 5% annual rate of inflation, the value of INR. 5,000 will become INR. 6381.41 in 5 years.
Given the number of years and rate of inflation, the calculator can help you anticipate the estimated future cost of living.
There are two measures of inflation in India:
Inflation can be calculated using the 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 rate of inflation can be calculated using CPI data for the two time periods you want to compare (usually a year apart).
Inflation = ((CPI x+1 – CPIx)/ CPIx))*100
Where,
CPI_x Is the Consumer Price Index for a specific period in the past.
CPI_x+1 represents the Consumer Price Index for the time period you want to compare to the past
Now, in order to calculate the future cost given the rate of inflation and current value, VNN Wealth’s inflation calculator uses the following formula-
Future Cost = Current Value * (1 + Inflation Rate) ^ Number of Years
Let’s say you are paying INR. 60 for a 1L carton of milk. After 5 years with 6% inflation, you’ll have to pay ~ INR. 80.
Future cost = 60*(1+0.06)^5 = 80.2
The inflation calculator can be used to align your investments with the inflation rate. You can invest your money in various instruments to generate inflation-beating returns.
An inflation calculator comes in handy to predict the future cost of things you require in your day-to-day life. That way, you can have an estimated idea of your future expenses.
VNN Wealth inflation calculator is a convenient tool compared to manual calculations.
Inflation in India is calculated using the consumer price index which indicates the average change in price of the goods and services over time. You can use this formula to calculate the inflation rate- ((CPI x+1 – CPIx)/ CPIx)) x 100. Using VNN Wealth inflation calculator would make the calculations easy.
