Rs. 1000 in 1981 Price Solely Rs. 50 Right this moment!


The associated fee inflation index for the monetary yr 2025-2026 is 376, representing a 3.58% improve. We compile 45 years of price inflation index knowledge to grasp the devastating penalties of inflation and why our singular focus ought to be on beating inflation for our long run objectives.

The associated fee inflation index (CII) shouldn’t be a measure of true worth inflation in India – in actual fact, no such metric launched by the government is. The CII inflates the acquisition worth of taxed belongings underneath long-term capital features with indexation. See for instance: My property sale capital features tax is 50% decrease due to indexation advantages.

Therfore, the CII is an approximate measure of the lower within the worth of our networth with the specific understanding that the precise lower in worth could be a lot greater. It is because many providers like healthcare and training are unregulated and have a lot greater inflation. As well as, because of the availability of recent services and products, new bills get added up.

The CII initially had a base yr of 1981-1982 with a price of 100. The government then modified the bottom yr to 2001-02. Each datasets can be found right here: Price Inflation Index Historic Knowledge. This examine will use the mixed dataset (45 years: 1980-81 to 2025-2026).

Within the 45 years which have elapsed, the CII has elevated from 100 to 1602 (that is within the mixed scale and won’t match the newest CII date). This may be acknowledged in some ways. Some readers are inclined to desire this model:

One thing that was priced Rs. 1000 in 1981 will now price a minimum of Rs. 16,023

That is, after all, the literal that means of inflation = worth improve. I desire to give attention to the impact of inflation on buying energy. That is properly conveyed by the Tamil phrase for inflation:  பணவீக்கம் (or actually cash changing into weaker).

A buying energy of Rs. 1000 in 1981 (which was important) has been decreased to only Rs. 50.25 right this moment

The 2 statements are utterly equivalent, however I desire the latter because it is a little more dramatic, highlighting the danger of chasing security in investments. One can add zeros to the assertion to get “Rs. one lakh has decreased to only Rs. 5025.1 over 45 years”.

Some argue, “However our salaries have elevated considerably throughout this time!”. Effectively, it higher improve! Else, we might be in hassle. However that’s lacking the purpose.

The purpose is that this lower in spending energy will proceed after our wage goes to zero at retirement. So we want a plan to (1) make investments proper in order that we are able to maintain spending as we do after retirement and (2) create revenue sources (energetic and passive) to complement our revenue (earlier than and after retirement). See: Tips on how to construct the best retirement portfolio.

This graph is a grim reminder of the duty forward of us.

Rs. 1000 in 1981 Price Solely Rs. 50 Right this moment!Rs. 1000 in 1981 Price Solely Rs. 50 Right this moment!
The autumn in worth of Rs. 1000 from 1980 to 2025 on account of price inflation

It is very important remind ourselves that our precise inflation might be a lot greater, even for a frugal existence. Right here is an instance: Inflation in India: Some Actual NumbersThat is the expansion of the price inflation index over the past 45 years.

Cost Inflation Index from 1980 to 2025Cost Inflation Index from 1980 to 2025
Price Inflation Index from 1980 to 2025

These are the annual charges of inflation. Although there’s a downward slant within the charges, price inflation might quickly improve every so often.

Yearly change in the cost inflation rate from 1980 to 2025Yearly change in the cost inflation rate from 1980 to 2025
Yearly change in the price inflation charge from 1980 to 2025

Since 2018, the 5Y price inflation charge has been lower than 5%. Have your important bills been solely at that degree over the past 3-4 years? Even within the unlikely occasion of this being true, it is not going to final lengthy as this, too, is cyclic.

CII vs 5Y annualized cost inflation rate from 1980 to 2025CII vs 5Y annualized cost inflation rate from 1980 to 2025
CII vs 5Y annualized price inflation charge from 1980 to 2025

As mentioned on this video, if we don’t safeguard our funding by taking ample dangers to try to beat inflation after we are younger, we could also be unable to purchase even a roadside chai.

How will we shield our cash?

Sure, we should spend money on fairness after we are younger to fight inflation. Nevertheless, this alone shouldn’t be sufficient! Lengthy-term investing in fairness is not going to all the time achieve success. See, for instance: What return can I count on from a Nifty 50 SIP over the subsequent ten years?

A better revenue, the appropriate investments, and energetic threat administration are the one methods to guard towards inflation, degrading the long run worth of our networth.

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Pattabiraman editor freefincalPattabiraman editor freefincalDr M. Pattabiraman(PhD) is the founder, managing editor and first writer of freefincal. He’s an affiliate professor on the Indian Institute of Expertise, Madras. He has over ten years of expertise publishing information evaluation, analysis and monetary product improvement. Join with him through Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You might be wealthy too with goal-based investing (CNBC TV18) for DIY buyers. (2) Gamechanger for younger earners. (3) Chinchu Will get a Superpower! for youths. He has additionally written seven different free e-books on varied cash administration subjects. He’s a patron and co-founder of “Price-only India,” an organisation selling unbiased, commission-free funding recommendation.


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Most investor issues might be traced to an absence of knowledgeable decision-making. We made unhealthy selections and cash errors after we began incomes and spent years undoing these errors. Why ought to our kids undergo the identical ache? What is that this guide about? As mother and father, what would it not be if we needed to groom one potential in our kids that’s key not solely to cash administration and investing however to any side of life? My reply: Sound Choice Making. So, on this guide, we meet Chinchu, who’s about to show 10. What he desires for his birthday and the way his mother and father plan for it, in addition to instructing him a number of key concepts of decision-making and cash administration, is the narrative. What readers say!

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