What Are the Impacts  of Inflation?

Inflation reduces the value of money. For instance, with 5% inflation, ₹100 today will be worth only ₹95 next year, affecting both savings and investments.

1. What is Purchasing Power Erosion?

Traditional savings like fixed deposits often don’t keep up with inflation. Investing in equities, real estate, or Index Long Term Strategy with Nifty 50 can offer better inflation-adjusted returns.

2. Investment Strategies

Inflation influences interest rates. The RBI may raise rates to control inflation, which can lower bond prices. A bond with a 7% rate could have a negative real return if inflation is at 8%.

3. Interest Rates and Bonds

Gold is seen as a hedge against inflation. In India, it’s popular during inflationary times, though its volatility and liquidity should be considered when investing.

4. Gold as a Hedge