What will be the impact of inflation on FD returns?
-
Considering the current rate of inflation in India, what impact does it have on the profitability of fixed deposits?
If I invest ₹166,000 in an FD offering 6.75% for 5 years, will the money I receive at the end buy more or less than it does now? Are there any inflation-protected FD options available in India?
-
With a 3.61% inflation rate and 6.75% fixed deposit interest, it would be profitable for you.
Investing ₹166,000 at 6.75% for 5 years will yield ₹59,362.50 in interest, totaling ₹225,362.50. Whether the sum buys more depends on the average inflation over the next 5 years. If inflation averages higher than 3.14%, the purchasing power will be less.