“12% returns!” — with 6% inflation quietly eating half. The statement showed growth; the grocery bill showed truth. Nominal returns impress, real returns feed: 12% minus 6% inflation is ~5.7% real, and ₹10,000 today buys ~₹5,540 in a decade at 6%. Every projection in this blog's calculators has this shadow twin. This guide teaches deflating any return, the Rule of 72 shortcut, personal-vs-CPI inflation, and why the SIP-vs-FD debate changes entirely in real terms.
Part of the India wealth & tax guide. Deflate projections in the inflation calculator; grow them in the SIP calculator first.
Deflate any return (the division, not subtraction)
Precisely: real = (1+nominal)/(1+inflation) − 1. At 12% and 6%: 1.12/1.06 − 1 ≈ 5.66% — close to naive 6%, and the gap widens at higher rates (never subtract when precision matters). Worked: ₹10,000 at 6% inflation for 10 years → 10000/1.06^10 ≈ ₹5,540 of today's purchasing power. A “₹1 crore corpus” at 6% inflation over 20 years spends like ₹31L today — still life-changing, but plan in real terms or retire surprised. Run both directions in the calculator: future value of money and required nominal for a real target.
Rule of 72 (and when it lies)
| Rate | Doubling time ≈ | Use |
|---|---|---|
| 6% inflation | 12 years to halve money | Purchasing-power gut checks |
| 12% returns | 6 years to double | Equity horizon sanity |
| 3% inflation | 24 years to halve | Conservative planning |
72 ÷ rate ≈ doubling (or halving) years. Accurate within months for 4–12%; drifts at extremes (use exact math past 15%). The memorable corollary: money halves every 24 years even at “mild” 3% inflation — cash is a melting ice cube, and every idle-year decision should feel that cold.
Your inflation ≠ CPI (rent weighs 34%+ for you, maybe 10% for CPI)
CPI baskets average the nation; your basket is rent, education, healthcare and food in your city. Urban renters facing 8–10% annual hikes live 3+ points above headline CPI; homeowners with fixed EMIs live below it. Build a personal index: weight your top 5 expenses, track yearly, compare against the 6% default in projections. Then revisit the SIP-vs-FD verdict in SIP math — at 8% personal inflation, even 12% nominal leaves ~3.7% real, and horizons must extend or contributions rise (see ₹1 crore planning).
Informational purposes only — not financial advice. Inflation regimes shift; recheck assumptions yearly. See /terms.