Rs.1000 in 1980 is only worth Rs. 66 in 2020! How to protect our money?

If you had paid Rs. 66 for an item in 1980, it would cost Rs. 1000 today! Inflation constantly reduces our purchasing power. Here is how we can handle this risk.

Published: February 24, 2020 at 11:32 am

Last Updated on December 29, 2021 at 5:22 pm

Yes! If you had Rs. 1000 in the year 1980, it would just be worth Rs. 66 in 2020 (down from Rs. 68 in 2019)  if we use the cost inflation index (CII) data published by the government. The trouble is this index is an underestimate and out lifestyle has changed (if not improved) with the help of technology. So actual inflation is a lot higher. Here is how we can protect our hard-earned money.

CII is the index used for computing indexation benefits for long terms capital gains tax computation and is proportional to the consumer price index. However, it does not realistically represent the inflation in our expenses.

Show below is the CII data with a base of 100 in 2001-2002. This is the data to be used for the computation of LTCG from real estate, non-equity mutual funds etc.


Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!
🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥

Cost inflation Index From 2001

FY CII
2001-02 100
2002-03 105
2003-04 109
2004-05 113
2005-06 117
2006-07 122
2007-08 129
2008-09 137
2009-10 148
2010-11 167
2011-12 184
2012-13 200
2013-14 220
2014-15 240
2015-16 254
2016-17 264
2017-18 272
2018-19 280
2019-20 289

This is the cost inflation index data (CII) from 1980. In 2016, the base of the index was changed from 1980 to 2000 (above data), both scales have been integrated into a single index below.  You can copy and paste into a spreadsheet.

Cost inflation Index From 1980

FY CII
1981-82 100
1982-83 109
1983-84 116
1984-85 125
1985-86 133
1986-87 140
1987-88 150
1988-89 161
1989-90 172
1990-91 182
1991-92 199
1992-93 223
1993-94 244
1994-95 259
1995-96 281
1996-97 305
1997-98 331
1998-99 351
1999-00 389
2000-01 406
2001-02 426
2002-03 447
2003-04 463
2004-05 480
2005-06 497
2006-07 519
2007-08 551
2008-09 582
2009-10 632
2010-11 711
2011-12 785
2012-13 852
2013-14 939
2014-15 1024
2015-16 1081
2016-17 1125
2017-18 1159
2018-19 1193
2019-20 1232

This is a year on year increase of 7% Imagine the inflation if lifestyle changes (due to needs or wants) is taken into account!

Cost inflation index since 1980
Cost inflation index since 1980

If we “invert” this graph, we will get the one shown in the featured image above. Rs. 1000 in 1980 would only be worth Rs. 66 in 2020. If we assume a modest (unrealistic) 5% inflation in over the next 30 years, one lakh today would be worth about Rs. 20,000! This implies that we need to invest right so that our investment grow at a pace greater than inflation after tax! The trouble is this 7% is an underestimate.

Price of petrol per litre in the metros

Price of one litre of petrol in the four Indian metros since 1990

Fuel costs alone have increased by 6-8% over the last three decades. This means for any business to be profitable, the cost of their service or product should increase at a higher pace. Meaning, we need to shell out that much more.

Personal inflation: an example

This is my family’s personal inflation as detailed before: Inflation in India: Some Real Numbers

personal inflation data for my family over 20 years

Notice the increase in fuel, electricity, paid-help and vegetables. All these contribute to the overall 8% number. However, this is for a frugal family that does not eat out. That does not go to malls or the cinema. We do not change smartphones, cars or television every few years. Inflation on basic necessities is 8% without considering lifestyle creep! Unless we take corrective steps, we would like the hamster running in the same place on a wheel (picture above)

Lessons from a cutting chai

Suppose you had Rs. 1 in 1990 and used 50 paisa to drink a cup of tea on the road. You invest the remaining 50 paisa and decide to drink a cuppa from that amount after 29-30 years. To so do, that Rs. 0.5 should have grown to Rs. 10! Meaning an after-tax return of about 11%.

After 20 years, tea on the street will cost about Rs. 60. If take Rs. 20 today and drank a cuppa with and invested the remaining Rs. 10, in order drink cutting chai after 20 years, the post-tax return required is Rs. 60. If we choose not to take and stick to a safe return of 7%, then we need to invest 80% more!! That is Rs. 18 to drink tea after 20 years!

projected price of roadside tea over the next 20 years
the projected price of roadside tea over the next 20 years

Would you rather invest 80% more to get safe returns or would you rather take some risk, learn to manage it and invest a reasonable amount?

This situation is a lot like a fork in the road. If you have to choose between guaranteed failure (if we do not invest enough) and a chance of success (if the risk is managed right)

Fork in the rtoad and the decision you need to take about whether to take investment risk or not!
Picture courtesy: Wikimedia Commons

How to protect our money? What is the solution?

There is no option. Unless long term portfolios contain at least 60% of equity (rest in fixed income), you will not be able to beat inflation. Your purchasing power will keep going down and will hut bad when your income drops to zero, aka retirement. Therefore, start as soon as possible, invest as much as possible and build a portfolio with good equity exposure as quickly as possible. There is no other practical option.

Video version

Do share this article with your friends using the buttons below.

🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 5000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! More than 1,000 investors and advisors use this!
New Tool! => Track your mutual funds and stock investments with this Google Sheet!
Follow Freefincal on Google News
Follow Freefincal on Google News
Subscribe to the freefincal Youtube Channel. Subscribe button courtesy: Vecteezy.
Subscribe to the freefincal Youtube Channel.
Follow freefincal on WhatsApp Channel
Follow freefincal on WhatsApp
Podcast: Let's Get RICH With PATTU! Every single Indian CAN grow their wealth! 
Listen to the Lets Get Rich with Pattu Podcast
Listen to the Let's Get Rich with Pattu Podcast
You can watch podcast episodes on the OfSpin Media Friends YouTube Channel.
Lets Get RICH With PATTU podcast on YouTube
Let's Get RICH With PATTU podcast on YouTube.

  • Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
  • Have a question? Subscribe to our newsletter with the form below.
  • Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.

Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!

Explore the site! Search among our 2000+ articles for information and insight!

About The Author

Pattabiraman editor freefincalDr. M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter, Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.
Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter what the market condition is!! Watch the first lecture for free!  One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course!  Increase your income by getting people to pay for your skills! More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts you and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!   
Our new book for kids: “Chinchu gets a superpower!” is now available!
Both boy and girl version covers of Chinchu gets a superpower
Both the boy and girl version covers of Chinchu gets a superpower.
Most investor problems can be traced to a lack of informed decision-making. We have all made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? My answer: Sound Decision Making. So in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan for it and teach him several key ideas of decision-making and money management is the narrative. What readers say!
Feedback from a young reader after reading Chinchu gets a Superpower (small version)
Feedback from a young reader after reading Chinchu gets a Superpower!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.
Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & it's content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
Our publications

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.

Your Ultimate Guide to Travel

Travel-Training-Kit-Cover-new This is an in-depth dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)