Inflation, explained simply

How it works, with real numbers

In September 2026, prices in India were 5.54% higher than a year earlier, by the government's consumer price index (CPI). If prices keep rising at that pace, something that costs ₹1,00,000 today will cost about ₹1,71,463 in 10 years.

Now take a 5-year bank FD at 6.05% (SBI's card rate). After tax at a 30% slab, it earns about 4.26% a year. That's below 5.54% inflation, so your balance grows but buys about 1.21% less each year.

Key ideas

1. 1Real return = return minus inflation. Roughly: if your money earns 7% and prices rise 5.5%, your buying power grows by about 1.5% a year.
2. 2Take tax off first. Work out the return after tax, then compare it with inflation.
3. 3Inflation moves around. It has been both lower and higher than today. NetReturns uses the latest reading and lets you change it.
4. 4Time magnifies it. Over 20 years, a small gap between your return and inflation becomes a big gap in what you can buy.

Mistakes to avoid

• Looking only at the big final number. Switch on 'Inflation-adjusted' to see what it's worth in today's money.
• Keeping long-term money only where it trails inflation. Fine for an emergency fund; costly over 20 years.

Words you'll see

Inflation

The yearly rise in prices.

CPI

Consumer Price Index: the government's measure of the prices households pay.

Real return

Your return after inflation: how much more you can actually buy.

Today's money

A future amount shown at today's prices, so you can picture what it buys.