Inflation

₹1 crore = ₹25 lakhs, The Silent Wealth Killer: Inflation

Byadmin

Let’s put things into perspective. If you have ₹1 crore today, you might feel financially secure. But have you considered what that amount will be worth in the future, thanks to inflation?

Assuming an average inflation rate of 7% per year:

  • In 10 years, ₹1 crore will have the buying power of just ₹50 lakhs.
  • In 15 years, it will shrink to approximately ₹36 lakhs.
  • In 20 years, it will be worth only about ₹25 lakhs.

This means that even though you may have a significant amount saved up, inflation quietly eats away at its real value over time. The things you can buy with ₹1 crore today will cost significantly more in the future, leaving you with less purchasing power despite having the same nominal amount.

Why Inflation Exists—and Why It Won’t Disappear

A common question is: Why does inflation exist at all? Why can’t we just keep prices stable and preserve the value of money forever?

Here’s the reality: modern economic theory suggests that inflation is a necessary part of a functioning economy. If money retained its value indefinitely, people would save enough and stop working. Without work and production, economies would stagnate.

To keep people working and economies growing, central banks use inflation as a tool. They do this by printing more money each year. The more money in circulation, the lower the value of each unit of currency. Since 2018, the average global money supply has been growing at around 8% annually. This steady increase in money supply fuels inflation, which in turn erodes the value of savings.

How to Secure ₹1 Crore in Future Value (Adjusted for Inflation)

Most traditional savings instruments, offer returns that barely match or even lag inflation rates. The sustainable way to combat inflation is to invest in assets that grow faster than inflation. That’s where Systematic Investment Plans (SIPs) and mutual funds come into play.

Let’s assume you want to accumulate enough wealth to have ₹1 crore’s worth of buying power in the future (adjusted for 7% inflation):

  • In 10 years, you’d need approximately ₹1.97 crores.
  • In 15 years, you’d need approximately ₹2.76 crores.
  • In 20 years, you’d need approximately ₹3.87 crores.

The Strategy:

If you increase your SIP contribution by 10% every year to keep pace with inflation, here’s how much you would need to invest monthly:

  • To reach ₹1.97 crores in 10 years, start with a SIP of around ₹58,880 per month.
  • To reach ₹2.76 crores in 15 years, start with a SIP of around ₹32,090 per month.
  • To reach ₹3.87 crores in 20 years, start with a SIP of around ₹19,650 per month.

The earlier you start, the less you need to invest each month to reach your goal.

“The best time to invest was yesterday. The second-best time is now.”

Market Volatility During Cooling Inflation: A Contradiction or an Opportunity?

At first glance, the latest economic data might appear paradoxical. Retail inflation in India recently fell below 4%—the first time since July 2024—reaching 3.61% in February 2025. Meanwhile, food inflation has dropped to 3.75%, the lowest level since May 2023.  The Reserve Bank of India (RBI) responded by trimming the repo rate by 25 basis points, aiming to spur growth.

Yet, in spite of this seemingly good news, market volatility has persisted since early 2025. Major indices, including the Sensex, experienced substantial declines—most notably a 1,000-point drop on February 28—driven by a mix of global economic concerns, foreign investor outflows, and domestic challenges.

So, why does the market remain skittish when inflation is cooling and interest rates are inching downward?

The Contradiction Explained:

Even if India’s inflation looks promising, global factors—such as oil price fluctuations, geopolitical tensions, and tightening monetary policies abroad—can overshadow domestic positives. At the same time, while lower inflation and interest rate cuts might typically attract foreign capital, global funds rotating out of emerging markets can leave local markets under pressure, as investor sentiment often trumps fundamentals in the short run. Moreover, although lower inflation benefits consumers, it doesn’t instantly translate into stronger corporate earnings.

For investors, this combination of market volatility and easing inflation presents a complex landscape. While lower inflation may lead to potential interest rate cuts by the RBI to stimulate economic growth, the current market downturn underscores the importance of a disciplined investment approach.

Systematic Investment Plans (SIPs) can be particularly effective in such scenarios, allowing investors to benefit from rupee-cost averaging. By consistently investing through SIPs, investors can acquire more units when markets dip, potentially enhancing long-term returns when markets recover.

This strategy turns market volatility into an opportunity for wealth accumulation, emphasizing the importance of maintaining a long-term perspective amidst short-term market fluctuations.

Inflation isn’t going away—it’s built into the global financial system. But that doesn’t mean you have to lose purchasing power. By investing in SIPs and mutual funds consistently and strategically, you can not only preserve but also grow your wealth over time. The key to financial success is simple: Invest for the long term. Invest more. Invest always.