How Rs 1 cr today will become just Rs 25 lakh in 20 years
The statement “Rs 1 crore today will become just Rs 25 lakh in 20 years” is a way of illustrating the impact of inflation on the purchasing power of money over time.
ЁЯФН What Does This Mean?
It means:
Due to inflation, the goods and services you can buy with Rs 1 crore today will cost Rs 4 crore in 20 years. So if you donтАЩt grow your money, its real value (purchasing power) shrinks dramatically.
In other words, Rs 1 crore today will only buy as much as Rs 25 lakh will buy today, 20 years from now.
ЁЯУЙ Let’s See the Math
We calculate this using the formula for future value adjusted for inflation: Future Value=Present Value├Ч(1тИТi)n\text{Future Value} = \text{Present Value} \times (1 – i)^n
Where:
- ii is the inflation rate
- nn is the number of years
LetтАЩs use 7% annual inflation (a realistic long-term average in India): FV=1 crore├Ч(1тИТ0.07)20=1 crore├Ч(0.93)20тЙИ25.8 lakh\text{FV} = 1 \text{ crore} \times (1 – 0.07)^{20} = 1 \text{ crore} \times (0.93)^{20} \approx 25.8 \text{ lakh}
So, after 20 years at 7% inflation, Rs 1 crore will be worth just about Rs 25тАУ26 lakh in today’s terms.
ЁЯУМ Key Takeaway
- Inflation silently erodes wealth.
- To preserve or grow the value of your money, it must grow faster than inflation.
- This is why investing (e.g., in equity, real estate, or inflation-beating assets) is essential for long-term goals like retirement, children’s education, etc.
Would you like a comparison of how much you’d need to invest today to maintain or grow Rs 1 croreтАЩs real value in 20 years?