- What is Inflation?
- What Causes Inflation in India?
- How is Inflation Measured in India?
- How Does Our Inflation Calculator Work?
- How Much is Inflation in India?
- What is Your Personal Inflation Rate?
- 6 Tips for Coping with Inflation in India
- How Can You Beat Inflation Through Investing?
Inflation impacts everyone—from rising grocery bills to higher rent and fuel prices. Over time, the purchasing power of your money decreases, meaning you need more rupees to buy the same goods and services.
But what exactly is inflation? How does it affect your daily life? And, most importantly, how can you prepare for it and reduce its impact on your finances? Find all the answers in our detailed guide below.
To help you understand inflation’s impact, we've also built a free, online India Inflation Calculator. This tool allows you to calculate the value of money from any year in the past to today in just a few seconds.
What is Inflation?
Inflation is the gradual rise in prices of goods and services over time, which reduces the value of money. As inflation increases, the same amount of money buys fewer goods.
For example
If a 1 kg packet of rice cost ₹50 last year but now costs ₹60, that’s a 20% increase due to inflation.
Inflation affects everything—from food and fuel to housing, healthcare, and wages—and plays a key role in India’s economy.
What Causes Inflation in India?
Inflation in India occurs due to several factors, including:
Demand-Pull Inflation
- When demand for goods and services exceeds supply, prices increase.
- Example: During festive seasons like Diwali, prices of sweets, clothes, and gold tend to rise due to high demand.
Cost-Push Inflation
- When production costs (such as raw materials and wages) rise, businesses pass these costs onto consumers.
- Example: If fuel prices go up, transport costs increase, making everything from vegetables to electronics more expensive.
Supply Chain Disruptions
- Natural disasters, global conflicts, or supply chain disruptions affect availability and prices.
- Example: The COVID-19 lockdowns led to supply shortages, increasing the prices of essentials like sanitisers, medicines, and even pulses.
Government & Monetary Policies
- The Reserve Bank of India (RBI) influences inflation through interest rates and money supply management.
- Example: If the RBI lowers interest rates, people borrow and spend more, increasing demand and pushing prices up.
Energy & Fuel Prices
- Rising petrol, diesel, and LPG prices increase transportation and production costs, making goods more expensive.
- Example: A hike in crude oil prices results in higher fuel costs, which increases the price of daily essentials like milk and vegetables.
How is Inflation Measured in India?
Inflation in India is primarily measured by the Consumer Price Index (CPI) and the Wholesale Price Index (WPI).
- CPI measures retail inflation, tracking the price changes in essential goods like food, housing, fuel, healthcare, and education.
- WPI tracks wholesale inflation, monitoring price changes at the producer level before goods reach consumers.
Formula for Inflation Rate:
Inflation Rate = ((CPI in Current Year − CPI in Previous Year) ÷ CPI in Previous Year) × 100
For example
If the CPI was 160 last year and 176 this year:
Inflation = ((176 − 160) ÷ 160) × 100 = 10%
This means inflation for the year is 10%.
How Does Our Inflation Calculator Work?
Our India Inflation Calculator helps you see how inflation affects the value of money over time.
How to Use It:
- Enter the amount of money you want to compare.
- Select the starting and ending years (e.g., 2000 to 2023).
- The calculator will show how much that amount is worth today, adjusted for inflation.
For example
If ₹1,00,000 in 2000 is equivalent to ₹3,50,000 in 2023, inflation has reduced your money’s purchasing power over time.
How Much is Inflation in India?
| Year | Inflation Rate (%) |
|---|---|
| 2023 | 5.7% |
| 2022 | 6.8% |
| 2021 | 5.1% |
| 2020 | 6.2% |
| 2019 | 4.8% |
| 2018 | 3.9% |
Highest Inflation in India:
- 1991 – Over 13% due to economic reforms and currency devaluation.
- 2022 – 6.8%, mainly due to global oil price hikes and supply chain issues.
What is Your Personal Inflation Rate?
The national inflation rate provides a broad picture, but your personal inflation rate depends on your spending habits.
For example
If your monthly grocery bill was ₹5,000 last year but is now ₹6,000, your personal grocery inflation rate is = ((6000 − 5000) ÷ 5000) × 100 = 20%
Even if national inflation is lower, your personal inflation rate might be higher depending on where you spend money.
6 Tips for Coping with Inflation in India
- Cut Unnecessary Expenses – Reduce dining out, impulse shopping, and subscriptions.
- Buy in Bulk & Use Discounts – Stock up on essentials and use loyalty programs at Big Bazaar, DMart, and online platforms.
- Negotiate Bills – Call your mobile, broadband, and insurance providers for better deals.
- Use Cashback & Rewards – Use UPI apps like PhonePe, Google Pay, and Paytm to earn cashback on purchases.
- Consider Own-Brand Products – Supermarket brands can be 20-30% cheaper than premium brands.
- Increase Your Income – Consider freelancing, side businesses, or stock market investments.
How Can You Beat Inflation Through Investing?
Investing is one of the best ways to protect your wealth from inflation. Here’s how:
✅ Stock Market (Sensex & Nifty 50) – Over the long term, equity investments outperform inflation.
✅ Gold & Silver – Gold is a traditional hedge against inflation, and digital gold is now an easy investment option.
✅ Mutual Funds & SIPs – Equity mutual funds have historically provided higher returns than inflation.
✅ Fixed Deposits (FDs) & PPF – Higher FD rates can help protect savings from inflation.
✅ Real Estate Investment – Property prices rise with inflation, making real estate a strong long-term investment.
By diversifying your investments, you can stay ahead of inflation and secure your financial future.
Inflation affects everyone, but by understanding its causes and impact, you can take smart financial steps to protect your money. Use our India Inflation Calculator to see how inflation affects your savings and spending.
