How Inflation Reduces Purchasing Power

The basic formula

PurchasingPower = TodayValue / (1 + i) ^ Years

Where i is the inflation rate as a decimal.

What 6% inflation does over time

₹1,00,000 today buys, in future terms, the equivalent of:
  in 10 yrs: ~₹55,840
  in 20 yrs: ~₹31,180
  in 30 yrs: ~₹17,411

A 30-year decline of more than 80% is hard to internalize until you look at a price you remember from your childhood.

Personal inflation

Headline CPI is an average of a basket. Your personal inflation depends on what you spend on. Education and healthcare often run well above CPI; electronics and telecom run below.

Implication for portfolios

A portfolio earning the inflation rate exactly is preserving purchasing power, not growing wealth. Real growth requires after-inflation, after-tax returns above zero — which is harder than it sounds at quoted rates.