One of the biggest concerns for the middle class is inflation, as rising prices are a harsh reality that directly impacts their daily lives. For middle- and low-income groups, high inflation not only reduces the purchasing power of their earnings but also erodes the value of their long-term savings. As the cost of living rises, the money saved for the future loses its real worth over time.
In this write-up, we will explore the future value of money by examining how Rs 1 crore will depreciate in value next year, after 3 years, and after 5 years. For these calculations, we will use the current inflation rate in the country, which stands at just over 6% (the official retail inflation rate for October 2024 was 6.21%).
What will be the value of Rs 1 crore next year?
To find out how much Rs 1 crore will be worth next year with a 5% inflation rate, you can use this simple formula:
Value After Inflation = Current Amount×(1−Inflation Rate)
Value After Inflation=Current Amount×(1−Inflation Rate)
So, for Rs 1 crore:
Value After Inflation = 10000000×(1−0.06)
This simplifies to:
Value After Inflation = 10000000×0.94 = 94,00,000
In simple terms: If inflation is 6%, your Rs 1 crore will be worth Rs 95 lakh after one year.
For 3 Years:
Value = 10000000 x (1 – 0.06)^3
Value = 10000000 x 0.835216
Value = Rs 83,52,160
After 3 years, Rs 1 crore will be worth Rs 83,52,160
For 5 Years:
Value = 10000000 x (1 – 0.06)^5
Value = 10000000 x 0.747258
Value = Rs 74,72,580
After 5 years, Rs 1 crore will be worth Rs 74,72,580
Summary:
After 1 year: Rs 94,00,000
After 3 years: Rs 83,52,160
After 5 years: Rs 74,72,580
Retail inflation in India surges to 6.21%
Retail inflation in the country surged to a 14-month high of 6.21% in October, up from 5.49% in September. The current inflation rate is above the the Reserve Bank of India’s (RBI) tolerance ceiling. The rise was mainly driven by persistently high food prices.
This marks the first time inflation exceeded the RBI’s upper tolerance limit of 6% since August 2023.
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