Compounding is the fact that the money you make off an investment can be reinvested to make even more money than your initial investment. The money you make goes back to work to make you even more money than before.
Sound confusing? It's actually pretty simple.
Say you've invested Rs.10, 000 and it makes 10% interest per year. In the first year, you make Rs.1, 000 in interest. But in the second year, you'll make Rs.1, 100 (not only does your initial investment of Rs.10,000 accrue interest but so does the additional Rs.1,000 you made in the first year). In the tenth year, you'll make Rs. 2,358. And in the 30th year you'll make Rs.15, 864. That's all without making another investment beyond your initial Rs.10, 000. In 30 years, the power of compounding gets you from making Rs.1, 000 per year to making Rs.15, 864 per year