Nominal return versus purchasing power
A ₹15,000 monthly SIP over 20 years at an assumed 12% return projects to roughly ₹1,49,87,219 in nominal terms. But adjusted for 6% inflation, that same corpus is worth approximately ₹46,73,086 in today's rupees — less than a third of the headline number.
Neither figure is "wrong." The nominal figure is what your account statement will actually show. The inflation-adjusted figure is what that amount will actually be able to buy, compared to what ₹46,73,086 buys today. A SIP projection that only shows the first number is giving you half the picture.
Before calling the SIP target funded
| Number | What it answers |
|---|---|
| Nominal corpus | What the investment could be worth in future rupees. |
| Future goal cost | What the goal may cost after inflation. |
| Real value | What the future corpus is worth in today’s purchasing power. |
Why this gap exists
A standard SIP calculator answers "how much money will I have," compounding your monthly instalment at an assumed rate. It has no concept of what that money will be worth, because that depends on a second, separate assumption: how much prices rise over the same period.
₹1 today and ₹1 twenty years from now are not the same thing, even though they're numerically identical. At a 6% annual inflation rate — an illustrative planning assumption here, not a guaranteed future rate — prices roughly 3.2 times over 20 years (1.06 compounded 20 times), not merely double. That's why ₹1,49,87,219 in 20 years has the purchasing power of only around ₹46,73,086 today, less than a third of the nominal figure — which is exactly what the more precise inflation-adjustment calculation above shows.
How sensitive is the real value to your inflation assumption?
Small differences in assumed inflation compound into large differences in real value over 20 years, the same way small differences in return assumption compound into large differences in nominal value:
| Assumed inflation | Real (today's-rupee) value of the ₹1,49,87,219 corpus |
|---|---|
| 5% | ₹56,48,525 |
| 6% | ₹46,73,086 |
| 7% | ₹38,72,982 |
A 2-percentage-point swing in assumed inflation — from 5% to 7% — changes the real value by nearly ₹18 lakh, on the exact same nominal SIP outcome. This is why an inflation assumption deserves the same scrutiny as a return assumption, not an afterthought.
The two numbers you actually need, side by side
Rather than picking one figure, the useful habit is holding both in view at once:
- Nominal value — what your SIP account will show, useful for tracking progress against a savings target and for tax/withdrawal planning.
- Real value — what that amount can actually buy relative to today's prices, useful for judging whether the corpus genuinely meets a future need (like funding a specific number of years of retirement expenses).
A ₹1.5 crore corpus sounds like "enough" for many goals today. Whether it's still enough in 20 years' inflated terms is a different, and more useful, question — one the real-value figure answers and the nominal figure doesn't.
Three ways inflation gets misread
The same real-vs-nominal distinction applies to any long-horizon SIP projection, including the ₹1 crore target worked through in how much SIP is needed for ₹1 crore — worth revisiting with an inflation adjustment once you have a nominal target in mind.
Comparing a nominal SIP projection directly against today's expenses. If you're checking whether a future corpus covers a cost that will also have inflated by the time you need it (school fees, a retirement budget, a large purchase), compare like-for-like — either inflate the future cost to match the nominal corpus, or deflate the corpus to match today's costs, but don't mix the two.
Assuming a higher return assumption "cancels out" inflation. They're separate, independent assumptions. A 12% return with 7% inflation leaves a very different real outcome than a 12% return with 5% inflation, even though the nominal projection is identical in both cases.
Ignoring inflation entirely because it feels like an extra step. As the sensitivity table shows, it isn't a minor adjustment — it can cut the effective value of a long-horizon corpus by more than half.
Build the goal in today’s and future rupees
Project your SIP's nominal maturity value on the SIP Calculator first, using your own monthly amount, return assumption and time horizon. Then take that resulting figure to the Inflation Calculator and run it through the "past value" mode with your own inflation assumption to see what it's really worth in today's terms. If you're working toward a specific retirement income rather than a lumpsum target, the Retirement Calculator does this real-vs-nominal accounting for you directly, across both the accumulation and withdrawal years.
Use CPI as a benchmark, not a prediction
MoSPI's current CPI series uses 2024=100 and defines inflation as the year-on-year percentage change in CPI. A calculator assumption such as 6% is therefore a planning input, not the latest CPI reading projected indefinitely into the future.
SEBI likewise describes SIP-calculator outputs as illustrations rather than promised returns. Stress-test both sides of the equation: a range of investment returns and a range of inflation rates.
Frequently asked questions
Does the SIP Calculator itself account for inflation?
No — it projects nominal growth only. Combining its output with the Inflation Calculator, as shown above, gives the real (purchasing-power-adjusted) figure.
What inflation rate should I use?
India's long-run retail inflation has broadly averaged 5–6% over the past decade, though it varies year to year. Testing a range (5%, 6%, 7%) rather than one fixed number, as in the sensitivity table above, gives a more honest picture.
Is a lower real value a sign that SIPs "don't work"?
No — it simply reflects that money loses purchasing power over time regardless of where it's invested. The relevant comparison isn't nominal vs. real, but what the real value of a SIP-grown corpus looks like against the real value of leaving the same money in a low-return account, where the inflation erosion would be identical but the growth wouldn't be there to offset it.
Should I plan around the nominal or the real figure?
Both, for different purposes — the nominal figure for tracking your account balance and any tax implications, the real figure for judging whether the eventual corpus will actually meet a future need at future prices.