How a ₹1000 SIP Can Help You Beat Inflation?

Mint

2 days ago

Have you ever heard the word 'inflation' often popping up in the news? Inflation is when the purchasing power of your money decreases as the prices of everything else keep rising. In such a scenario, it is important to keep growing your money and beat inflation.
This is where a Systematic Investment Plan can be helpful. Investing just ₹ 1,000 a month in mutual funds can help you grow your money faster than inflation. Let's understand how this strategy can power your wealth journey.
Think about anything you like and compare its price today with how much it was priced 5-10 years ago. A samosa used to cost around ₹ 5-10. Today, you get it for ₹ 20-25 or even more. That's inflation for you.
India's consumer price index (CPI) inflation fell to 2.82% in May 2025, the lowest in over six years. Wholesale inflation (WPI) is also low, at 0.39% in May, easing pricing across the board.
As inflation is under control, the central bank also decided to go ahead with rate cuts reflecting these low inflation levels, with the repo rate now at 5.50%.
Lower rates mean banks earn less on deposits, pushing returns down. This makes SIPs in equity mutual funds even more appealing. Meanwhile, the policy stance is shifting to 'neutral,' suggesting fewer future cuts.
Saving in a typical bank account or fixed deposit might only get you around 6-7% interest, which is barely above inflation. You want something that makes your money gain 8-12% annual returns. That's when we talk about SIPs.
You don't need a ton of money to start making your money grow. Even a ₹ 1,000 SIP can beat inflation:
Rupee Cost Averaging : When the stock market dips, your fixed investment buys more units; when markets rise, you buy fewer. Over time, this balances out and evens your returns.
: When the stock market dips, your fixed investment buys more units; when markets rise, you buy fewer. Over time, this balances out and evens your returns. Power of Compounding : Your returns earn returns. Even small monthly SIPs grow exponentially over the years.
: Your returns earn returns. Even small monthly SIPs grow exponentially over the years. Discipline: It builds a savings habit, automated, no guessing, no emotional investing.
For example:
Let's say you invest ₹ 1,000 monthly for 10 years at an assumed annual return of 12%. Using the formula FV = P × [((1 + r)^n – 1) / r] × (1 + r), you'll have around ₹ 2.24 lakh, even though the total invested is ₹ 1.2 lakh. This way, you would essentially beat the inflation while almost doubling your money.
You don't even need to apply the formula; just use any SIP calculator available online to calculate how much return you'll be able to earn as per your SIP investment over a fixed period.
To really beat inflation, you can also increase your SIP over time with a Step-Up SIP, where you increase your monthly SIP by a certain percentage every year. Experts suggest that doing this aligns your savings with rising costs and income.
You can start with ₹ 1,000 in year 1, then ₹ 1,100 in year 2, ₹ 1,210 in year 3, and so on. The impact would be that in 10 years with a 10% top-up and 12% returns, your corpus could be around ₹ 3.26 lakh versus ₹ 2.24 lakh with a fixed SIP. After inflation adjustment, the step-up SIP towers over a regular SIP.
To begin with, you need to look for the right funds, like index funds, equity funds, hybrid funds, etc., with consistent past returns and a low expense ratio. Once that is done, start your SIP. Most AMCs let you start with as low as ₹ 500, so ₹ 1,000 is easy to begin and keeps things manageable.
Next, you can choose to opt for a step-up SIP. Many platforms let you auto-increase SIP yearly. If not, simply adjust manually when you want to. And that's it!
Remember: Don't panic with market ups and downs. SIP absorbs volatility through rupee cost averaging. You can think about rebalancing your portfolio only if your goals or fund allocations change.
Inflation is low now, but it won't stay low forever. With a ₹ 1,000 SIP, you're getting your foot in the door of market returns that beat inflation over time. With an SIP, you're giving your money a real chance to grow ahead of the cost of living.