Is your salary raise really a raise? How to check it against inflation
Appraisal season brings a number: your hike. Say it is 6%. The next question is whether your life actually gets 6% better, because the things you buy also cost more each year. The gain that is left after prices rise is called your real raise. It is easy to compute, and it helps you compare offers, negotiate, and plan your budget.
The formula
Real raise = (1 + raise) / (1 + inflation) - 1.
Do not simply subtract inflation from the raise. Dividing is more accurate, although the two answers are close for small numbers.
Which inflation number to use
The Reserve Bank of India's Monetary Policy Committee resolution dated 7 October 2026 projects consumer price inflation of 5.2% for 2026-27. We use 5.2% below as a reference point, but it is an economy-wide projection. Your own cost of living can differ, because rent, school fees, food and fuel do not rise at the same pace for everyone. Treat it as a starting point and then check it against your own bills.
Worked examples
We calculated these ourselves. Take a monthly salary of Rs 50,000 and inflation of 5.2%.
- 4% raise: new salary Rs 52,000. In terms of last year's buying power that is 52,000 / 1.052 = about Rs 49,430. Your real raise is about -1.14%, which means you are slightly behind.
- 6% raise: new salary Rs 53,000. In last year's buying power that is about Rs 50,380. Your real raise is about +0.76%, so you are only slightly ahead.
- 10% raise: new salary Rs 55,000. In last year's buying power that is about Rs 52,281. Your real raise is about +4.56%, a clear gain.
So a 6% raise, which sounds healthy, leaves less than 1% real improvement under this assumption. A 4% raise means you can buy a little less than before.
What to do with this
- Compare offers properly. A new job offering a 10% hike gives a bigger real gain than a 6% hike at your current employer, other things equal. Remember to compare benefits and risks too, not just the number.
- Look at the total package. A hike on basic pay changes provident fund and other parts differently from a hike on allowances. Use the Gunaka CTC calculator to see take-home pay.
- Ask for a figure, not a feeling. In a discussion with your manager, you can say that a hike of X% keeps your buying power flat and ask what the team can do beyond that.
- Track your own inflation. For three months, note what you pay for groceries, transport and rent. If your personal costs rise faster than 5.2%, a 6% hike is worth even less.
Government employees
If you work for the government, your pay moves through increments and dearness allowance revisions rather than a single hike. The Gunaka salary calculators and pay fixation tab can help you see your pay after each change. Always check the latest official orders for the rates.
Open the Gunaka Raise vs Inflation calculator, type your salary, your hike and an inflation figure, and read the real raise. Gunaka gives estimates for planning, not financial advice.
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