With India’s retail inflation surging to a 14-month high in October 2024, it is important to be prepared for a future of rising prices by calculating and budgeting how much expenses one would have to deal with in the longer run.
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Inflation rose to 6.21% in that time period, breaching the tolerance limit of the Reserve Bank of India (RBI) by 21 basis points. The RBI’s inflation target is 4% with a 2% margin of difference on either side.
Therefore, the following shows how much an imaginary household would have to budget for the future.
An imaginary scenario
Taking an example of a family with a fixed monthly expense of ₹1 lakh, the table below shows how much money would be needed to finance its expenses over a period of 10, 20, and 30 years with a base annual inflation rate of 7%, as per the inflation calculator of the Securities and Exchange Board of India (SEBI).
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| Time Period | Amount Adjusted for Inflation |
| 10 Years | ₹1.97 lakh |
| 20 Years | ₹3.87 lakh |
| 30 Years | ₹7.61 lakh |
However, it is also to be noted that the constant 7% base inflation rate is just a rough estimate of a worst case scenario.
The calculations thus show that it is important to budget around twice the ₹1 lakh amount by the time 10 years passes for the same level of expenses to be mostly safe.
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What is retail inflation?
Retail inflation refers to the gradual rise in the price of goods and services in an economy as the value of money gradually decreases over a period of time due to multiple reasons such as increasing currency circulation, increasing prices of essential commodities like food, petroleum products, and so on.
An example of this would be the total costs associated with a home-cooked vegetarian thali rising by 20% in October 2024, compared to October 2023 and for a non-veg thali, costs rose 5%, according to a CRISIL Roti Rice Rate (RRR) report published on Wednesday, November 7, 2024.