In today’s context, if someone is a crorepati, he is considered a rich man who can afford a decent living, provide good education for his children, handle major medical emergencies, and enjoy good social security with considerable savings in various financial plans. However, consider whether the same crorepati would be able to meet all these necessities and expenses in the future, despite his current wealth. Obviously not, because the value of the rupee will not remain the same over time. In this story, we will explore, for example, what the value of Rs 1 crore might be by 2050, i.e., around 25 years later.

What is inflation?

Inflation reduces the value of money over time, making goods and services more expensive. For instance, something that you could buy for Rs 100 twenty years ago is now priced significantly higher. The average annual inflation rate in India has hovered around 5-6% over the last decade, and if this trend continues, it will substantially affect the purchasing power of money in the coming decades.

Value of Rs 1 crore over time

Analyzing the future value of Rs 1 crore reveals its diminishing worth due to inflation:

In 10 years, at a 6% inflation rate, Rs 1 crore will be worth approximately Rs 55.84 lakh.

In 20 years, its value will drop to around Rs 31.18 lakh.

By 2050, it could diminish to as low as Rs 17.41 lakh.

Also read: Rs 1 crore from 20 and 30 years ago: What it’s worth today – Inflation impact

Diminishing purchasing power

The impact of inflation on purchasing power becomes evident when we look at historical salaries and prices. For example, in 1950, gold was priced at just Rs 99 per 10 grams, while today it has skyrocketed to nearly Rs 78,000 per 10 grams. This drastic change highlights that what was affordable in the past is often beyond reach today. Thus, the purchasing power of someone earning Rs 200 a month in 1950 would require an income of over Rs 1.5 lakh per month today to maintain the same standard of living.

Let’s examine the value of Rs 1 crore at different points in the past:

20 Years Ago (2004): Rs 1 crore is now equivalent to about Rs 38 lakh in today’s value due to inflation.

30 Years Ago (1994): Similarly, Rs 1 crore from this period translates to roughly Rs 23.2 lakh today.

These comparisons starkly reveal how inflation has diminished the value of money over time.

Investment strategies

Given the inevitable impact of inflation on future wealth, it’s crucial to adopt sound investment strategies. Many individuals focus solely on the nominal value of their investments today, neglecting to consider how inflation will affect their real purchasing power in the future. It’s essential to factor in these changes when planning long-term financial goals.

In summary, while Rs 1 crore may appear to be a significant amount today, its purchasing power is likely to decrease drastically over the coming decades due to inflation.