Article

Nominal Value
June 06 , 2012

Say you are asked the average tuition fee for a graduate programme in college today, you might estimate Rs10 lakh. If you are asked the same fee in the year 2030, you would doubtless know it would cost a lot more. But how much? You would need to account for inflation in the interim, even if there were no other changes in structure.

If we use inflation estimates and calculate the actual numbers, such values are called nominal values. While they are technically the most appropriate, the problem with using nominal values in daily usage is that most people find it difficult to relate. Saying that a college tuition costs Rs 50 lakh in the year 2030 (the nominal value) is correct, but useless information. Saying that it would cost Rs10 lakh in today's terms (the real value) is much more informative. This is why real values are used in most projections

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