Inflation Calculator

The Reserve Bank of India (RBI) projects Consumer Price Index (CPI) inflation to average around 4.8% for the fiscal year 2025–26, with expectations of it easing further to 4.0–4.2% in the near term. Core inflation is also expected to remain steady between 4.2–4.4%. In such an environment, understanding how inflation impacts your money becomes crucial. An inflation calculator can help you measure the changing value of money over time, enabling smarter financial planning by adjusting for rising costs and preserving your purchasing power.

What Is Inflation Calculator?

An inflation calculator is a financial tool that helps you understand how the value of money changes over time due to inflation. By inputting an amount of money, a base year, and a target year, the calculator shows how much that amount would be worth in today's terms or in the future, adjusting for inflation. This helps you measure the real purchasing power of your money across different time periods, making it useful for budgeting, investment planning, and long-term goal setting.

How to Use ClearTax Inflation Calculator

Using the ClearTax inflation calculator, knowing and understanding how inflation can affect your overall savings is very easy. To use the calculator, follow the below steps:

• Enter the value of the current expenses.
• Mention the inflation rate percentage. It should be the current rate.
• Enter the period in years for which you want to understand the future price.
• The calculator will tell the exact amount based on your entered information.

You can even use it as an inflation calculator by year to understand how the prices will change.

Formula To Calculate Inflation

To understand how an inflation calculator works, you need the Consumer Price Index (CPI) values for two different time periods. These values allow you to calculate the inflation rate using the formula:

Inflation Rate = [(CPI in Year 2 – CPI in Year 1) / CPI in Year 1] × 100

Let’s apply this using RBI’s projected CPI data.

Assume the CPI for 2024–25 is 100 (base value), and for 2025–26 it is expected to rise by 4.8%.

That means the CPI in 2025–26 will be:

CPI in 2025–26 = 100 + (4.8% of 100) = 104.8

Now applying the formula:

Inflation Rate = ((104.8 – 100) / 100) × 100 = 4.8%

This confirms that with a 4.8% increase in CPI, the inflation rate is 4.8%. 

How To Calculate Future Value

You can use the future value calculator or the formula below to calculate this value. This value is the value of a particular asset in the future on a specific date based on a certain growth rate. The formula for calculating future value is:

FV = PV*(1+i)^n

In this formula, 

• PV = present value of the goods
• I = interest rate
• N = number of periods

Let’s understand how to calculate this value using an example:

Let’s assume Ajay holds an asset and wants to know its value in the future. The different components that are required are as follows.

• PV = 2,50,000
• I = 12%
• Time period = 5 years

So, FV = 2,50,000*(1+12%)^5 equals to 4,40,585

Benefits of Inflation Calculator

There are many advantages to using an inflation calculator. Let’s look at some of its benefits below:

• Preparing for rising costs: Helps plan for future expenses by showing how inflation affects purchasing power, aiding better financial planning.
• Informed decisions: Provides insights into how inflation impacts savings and investments, supporting smarter budgeting and planning.
• Evaluates returns: Assesses real investment returns by factoring in inflation, helping choose better-performing options.
• Educational tool: Simplifies inflation concepts, improving financial awareness and money management.

Inflation Rate in India for the Last 10 Years

The below table represents the Indian inflation rate from 2013-2024: