Securing Hannav Ledger...
Securing Hannav Ledger...
Glossary
Inflation is the sustained rise in general price levels, reducing the purchasing power of money over time.
Inflation means ₹100 today buys less tomorrow — prices of groceries, rent, and education keep climbing.
India tracks CPI and WPI. RBI targets CPI inflation around 4% with tolerance band. Nominal returns must exceed inflation to generate real wealth. Fixed-income investors face reinvestment and purchasing power risk when inflation rises unexpectedly.
At 6% inflation, ₹50 lakh today needs roughly ₹89.5 lakh in 10 years to maintain the same lifestyle — equity and growth assets historically help bridge this gap.
If FD yields 7% and inflation is 6%, real return is roughly 1%. Taxes further erode purchasing power.
Equity, real estate, gold, and inflation-indexed bonds historically provide some inflation protection over long periods.
RBI primarily targets Consumer Price Index (CPI) combined inflation, published monthly by MOSPI.