Inflation
The gradual rise in the general level of prices over time, which reduces what each rupee can buy.
If prices rise 6% in a year, something that cost ₹100 now costs ₹106 — so the same money buys a little less. Over decades, inflation can seriously erode the value of cash left idle.
This is why money is invested rather than simply saved: to have a chance of growing faster than inflation and preserving its purchasing power.
Key points
- Erodes the purchasing power of money over time.
- Cash left idle loses real value to inflation.
- Investing aims to outpace it.