Inflation, the rate at which the general level of prices for goods and services rises, can steadily erode the purchasing power of your income. That is why you should invest a portion of your savings at a rate higher than the inflation rate to recover the loss of purchasing power.
This means that over time a rupee will be able to buy a lesser amount of goods and services. If the inflation rate is 5%, then Rs. 100 worth of goods will cost Rs. 105 after a year.
The following table indicates how the value of Rs 1,00,000 will change over time at different levels of inflation.
|
Years |
2 |
3 |
4 |
4.5 |
5 |
6 |
5 |
90,573 |
86,261 |
82,193 |
80,245 |
78,353 |
74,726 |
10 |
82,035 |
74,409 |
67,556 |
64,393 |
61,391 |
55,839 |
15 |
74,301 |
64,186 |
55,526 |
51,672 |
48,102 |
41,727 |
20 |
67,297 |
55,368 |
45,639 |
41,464 |
37,689 |
31,180 |
25 |
60,953 |
47,761 |
37,512 |
33,273 |
29,530 |
23,300 |
30 |
55,207 |
41,199 |
30,832 |
26,700 |
23,138 |
17,411 |
Table indicating the value of Rs 1,00,000 at different levels of inflation over time
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