Why Your Future Corpus May Be Worth Less Than You Think
Most SIP calculators show you one number: the maturity value. A ₹5,000 monthly SIP at 12% for 20 years grows to approximately ₹49.96 lakhs — impressive on paper. But at 6% annual inflation over those same 20 years, that corpus is worth only around ₹15.6 lakh in today's money. This calculator shows both numbers side by side, so you can plan for what your money will actually buy.
(what you receive)
(today's purchasing power)
What is Inflation and Why Does It Matter for SIP?
Inflation is the rate at which the general price level of goods and services rises over time. India's average CPI inflation has historically ranged between 4–7% per annum. When you invest through a SIP, you earn nominal returns — the raw percentage gain. But real return is what actually matters for wealth creation.
Over 20 years, the compounding effect of this inflation drag is enormous — and most investors only realise this when they actually try to use their corpus.
How This Calculator Works
(1 + rate)^years to give you the real value — what your corpus buys in today's money.Nominal vs Real Returns: Practical Examples
All examples assume 6% annual inflation. Values are illustrative.
| Monthly SIP | Return | Period | Nominal Value | Real Value (Today's ₹) | Inflation Loss |
|---|---|---|---|---|---|
| ₹5,000 | 12% | 10 years | ₹11.61 L | ₹6.49 L | −44% |
| ₹5,000 | 12% | 20 years | ₹49.96 L | ₹15.60 L | −69% |
| ₹10,000 | 12% | 20 years | ₹99.91 L | ₹31.19 L | −69% |
| ₹10,000 | 14% | 20 years | ₹1.32 Cr | ₹41.27 L | −69% |
Values are approximate and for illustration only. Actual returns may vary.
Why Most Investors Ignore Inflation (and Pay the Price)
Behavioural finance research consistently shows that investors anchor on nominal numbers. When a planner says "you need ₹1 crore for retirement," most people target ₹1 crore in nominal terms — without adjusting for what it will actually buy in 20 or 30 years.
At 6% annual inflation, ₹1 crore today will be equivalent to:
How to Set Inflation-Proof SIP Goals
Decide how much you need in today's purchasing power. Example: "I want a retirement corpus equivalent to ₹50 lakh in today's money."
Multiply your real goal by the inflation factor. At 6% for 20 years: ₹50L × (1.06)^20 = ₹50L × 3.207 = ₹1.60 crore nominal target.
Use our regular SIP Calculator to find the monthly SIP needed to reach your nominal target at your expected return rate.
Increase your SIP by at least the inflation rate each year. A Step-Up SIP automates this — keeping your plan on track as inflation and income evolve.
The Precise Formula: Fisher Equation
Simple subtraction (12% − 6% = 6%) underestimates the inflation drag. The precise formula is:
Real return = [(1.12) / (1.06)] − 1 = 5.66% per annum
(vs 6% from simple subtraction — a meaningful difference compounded over 20+ years)
Which Investments Beat Inflation?
Comparison at 6% annual inflation for Indian investors
| Investment | Typical Nominal Return | Real Return | Beats Inflation? |
|---|---|---|---|
| Savings Account | 3–4% | −2% to −3% | No |
| Fixed Deposit | 6–7% | 0% to 1% | Barely |
| PPF | 7.1% | ~1% | Marginally |
| Debt Mutual Funds | 7–9% | 1–3% | Slight |
| Equity SIP (Large Cap) | 11–13% | 5–7% | Yes |
| Equity SIP (Flexi/Mid Cap) | 13–18% | 7–12% | Strongly |
The Role of Step-Up SIP in Fighting Inflation
One of the most powerful strategies to counteract inflation is to increase your SIP amount every year in line with income growth. If your salary rises 8–10% annually and you raise your SIP by the same percentage, you maintain — or grow — your real investment rate.
A Step-Up SIP automates this. An investor starting at ₹5,000/month and stepping up 10% annually invests ₹13,430/month by year 11 — but the gradual increases make it feel manageable each year.
