SIP vs inflation: ₹3,118 became ₹10,000 in 20 Years. How much could a SIP have created?

If you kept ₹3,118 under your mattress in 2006, it would still be ₹3,118 today, but it may buy only what ₹972 bought in 2006. The remaining value, about 69%, has been eaten by inflation. This is why keeping your SIP amount constant for 20 years will be like partially surrendering your retirement corpus to inflation.

For long-term investors, the real enemy of wealth is not market volatility. Rather, it is the quiet erosion of purchasing power, and the best defence is not a larger SIP but an SIP that grows with you. This article explains how an investment of ₹3118 a month could have grown in 20 years in four different scenarios, assuming annual compounded returns of 12% and 15%.

SIP calculation shows that an investor who started a ₹3,118 monthly investment in 2006 and never increased it, would be investing the same nominal amount in 2026, but that ₹3,118 would have less than one-third of the purchasing power it started with. Therefore, the real way to fight inflation is to step up the SIP every year in line with rising income and prices.

Consider four paths for someone who started with ₹3,118 a month in 2006.

• The first is keeping it as cash.

• The second and third are flat SIPs at 12% and 15% annualised return, with the monthly amount held constant at ₹3,118 throughout.
• The fourth is a step-up SIP, where the monthly amount increases by 6% every year to match inflation, starting at ₹3,118 in 2006 and reaching approx. ₹9,434 by the final year.

The step-up SIP at 12% produces ₹42.72 lakh, nearly 50% more than the flat SIP at the same return. At 15%, the step-up corpus of ₹59.06 lakh is nearly 43% than the flat SIP corpus. The investor has put in ₹13.76 lakh instead of ₹7.48 lakh, but the additional ₹6.28 lakh of contributions, made in later years, when the SIP amount was higher, compounded for fewer years, and yet added ₹14 lakh to ₹18 lakh to the final corpus.

The SIP amount in the step-up path rises from ₹3,118 in year 1 to ₹3,936 in year 5, ₹5,268 in year 10, ₹7,049 in year 15, and ₹9,434 in year 20. This is roughly the trajectory of a salaried person's income, which typically grows at or above the inflation rate. The point is that most people already increase their spending with inflation. The step-up SIP simply requires them to increase their investing at the same pace.

The compounding effect becomes visible only after several years. In the flat SIP at 12%, the corpus at year 5 is just ₹2.53 lakh. By year 10, it reaches ₹6.99 lakh. The real acceleration happens after that. By year 15, the corpus is ₹14.84 lakh, and by year 20, it is ₹28.68 lakh. In the last five years alone, the corpus grows by ₹13.84 lakh, which is more than the total corpus at year 15.

The gap between the flat and step-up paths widens dramatically in the second half of the investment journey. At year 10, the step-up SIP at 12% is ahead by ₹ 1.73 lakh. By year 20, that gap has grown to ₹14.04 lakh. The reason is that the larger contributions in later years are being added to a corpus that has already grown substantially, so they compound on a much bigger base.