Real Income

Real income refers to the actual earnings of an individual, business, or nation after adjusting for inflation, thereby reflecting the true purchasing power of that income. Unlike nominal income, which measures earnings in current monetary terms, real income accounts for changes in price levels and provides a more accurate indicator of economic well-being and living standards. By comparing real income with nominal income, one can assess how inflation affects purchasing power and economic progress over time.

Example: If a person’s salary increases from ₹50,000 to ₹55,000 per month while inflation rises by 10%, the real income remains roughly unchanged because the increase in prices offsets the higher nominal earnings.