See how a ₹5,000 monthly SIP for 20 years at 12% grows to ₹49.96 lakh but is worth only about ₹23.11 lakh in today's money after inflation.
A ₹5,000 monthly SIP invested for 20 years at 12% builds a nominal corpus of about ₹49.96 lakh. Adjusted for inflation, that same corpus is worth closer to ₹23.11 lakh in today's rupees.
This is the gap most SIP statements never show you. A large maturity figure can make you feel like you've done everything right, but it doesn't reveal the complete picture. While your investments may have grown, the cost of living has grown too. By the time you redeem your SIP after 20 years, every rupee is likely to buy less than it does today.
Nominal Return vs Real Return, Plainly
Nominal return is the growth rate you see in your SIP statement. It shows how much your investment has grown over time without accounting for inflation. For example, if your SIP earns 12% annually, that's your nominal return.
Real return adjusts that growth for inflation. If the cost of living rises while your investment grows, not all of that 12% represents a real increase in your purchasing power. A portion simply offsets higher prices.
Neither number is wrong, but they answer different questions. Nominal return tells you how much your investment grew, while real return tells you how much your purchasing power actually improved after accounting for inflation.
The Fisher Equation, and Why Simple Subtraction Falls Short
Many people estimate real return by subtracting inflation from the nominal rate. Take 12% nominal, subtract inflation, and call the difference the real return. It's a fair rough estimate, but the formula behind it isn't quite right.
The accurate method is the Fisher equation:
| Real Rate = [(1 + Nominal Rate) ÷ (1 + Inflation Rate)] − 1 |
According to the Ministry of Statistics and Programme Implementation, India's headline Consumer Price Index (CPI) inflation was 3.93% year over year in May 2026. If your SIP earns a nominal return of 12% a year, the Fisher equation gives a real return of approximately 7.76% after adjusting for inflation.
You might be tempted to simply subtract inflation from the nominal return, which would give 8.07%. While that's a reasonable estimate, it isn't mathematically exact. The difference is only about 0.3 percentage points in this example, but over a 20-year investment period, even small differences can have a noticeable impact on your final purchasing power.
Worked Example: The Base Case SIP, Nominal vs Real
Take the same ₹5,000 monthly SIP for 20 years used throughout this series, growing at a nominal 12% to a final corpus of ₹49.96 lakh, the exact figure covered in our article on what a ₹5,000 SIP for 20 years actually becomes.
To see what that corpus is worth in today's purchasing power, divide it by the cumulative effect of 3.93% inflation compounding over the same 20 years.
| Figure | Amount |
|---|---|
| Nominal corpus after 20 years | ₹49.96 Lakh |
| Real value in today's purchasing power | ₹23.11 Lakh |
| Difference lost to inflation | ₹26.85 Lakh |
At 3.93% inflation compounding for 20 years, prices roughly double over that period. Something costing ₹100 today would run around ₹216 by year 20. Your SIP corpus grew on paper, but a good chunk of that growth was just tracking the same rising prices rather than adding to your real wealth.
Why a Bigger Number Can Still Buy Less
Nothing about the ₹49.96 lakh figure is fake. It's exactly what your account would show. The catch is that a rupee in year 20 isn't the same rupee as one today, and lining up the two numbers side by side without adjusting for that gap gives you a skewed sense of how much wealthier you actually became.
The same logic applies to any long-term financial goal stated in future rupees, whether it's a retirement corpus, a child's education fund, or a home down payment target. A number that sounds comfortable today can quietly fall short of its purpose by the time you need it, simply because prices moved while nobody was watching.
SIP investing did not fail here. The nominal number was just never the whole picture to begin with, and now you have the rest of it too.
The Reassurance: This Is a Correction, Not a Warning
None of this is a reason to avoid SIPs or equity investing. A real return of roughly 7.76% a year after inflation is still a strong outcome over two decades, well above what most fixed deposits or savings accounts would have delivered in real terms over the same period.
Your SIP did not underperform. The number on your statement was always telling you half the story, and this article is the other half.
How Much Will That Future Amount Really Be Worth?
Whenever you see a large future rupee amount, whether from a SIP calculator, a retirement plan, or a loan payoff projection, ask yourself one simple question: what would this amount be worth in today's money, not 20 years from now?
For example, if ₹50 lakh feels like enough to meet your goal two decades from now, think about what that amount would be worth in today's terms. With moderate inflation over 20 years, its purchasing power could be closer to ₹25 lakh. If that adjusted amount still meets your goal, you're on the right track. If not, you may need to aim for a higher target, whether you invest through a fixed SIP or a step-up SIP.
Frequently Asked Questions
Is subtracting inflation from nominal return good enough to estimate real return?
It's a reasonable rough estimate but not mathematically exact. The Fisher equation, real rate equals (1 plus nominal) divided by (1 plus inflation) minus 1, gives the correct figure, and the gap between the two methods grows more noticeable over long horizons.
What inflation rate should I use to estimate my own SIP's real return?
India's most recent official CPI figure is a reasonable starting point, currently 3.93% as of May 2026 per MoSPI. For long-term projections, some investors use a slightly higher long-run average, since inflation varies year to year.
Does this mean equity SIPs are not worth it after inflation?
No. Equity SIPs have historically delivered positive real returns after adjusting for inflation and have generally outperformed fixed deposits and savings accounts over the long term. The purpose of this article is to show the difference between nominal and real returns, not to discourage SIP investing.
Should I plan my financial goals using nominal or real figures?
Think in real, today's purchasing power terms when setting a goal, since that reflects what you'll actually be able to buy. Then work backward to the nominal amount you'll need to accumulate by your target date.
Check What Your Own Future Number Is Really Worth
Your SIP statement tells you how much money you could receive in the future. What it doesn't show is how much that money will actually be worth after inflation. Looking at both figures gives you a more realistic view of your investment.
Try our free Inflation Impact Calculator to see the present-day value of any future amount, whether it's from a SIP, a retirement plan, or another long-term financial goal.