So your friend makes $100,000 annually in the states? The first thought we have as Indians is that the friend earns close to Rs. 80 lakh. Well, that's quite a salary. But do you have to make that amount to have a similar lifestyle in India?
This is called "Purchasing power parity" - a popular metric used by analysts to compare different currencies' economic productivity and standards of living through a "basket of goods" approach.
Working in the US means more salary but also more expenses. How does it compare with India? If you apply purchasing power parity, a $1 lakh salary per year equals Rs 23 lakh in India, not 80 lakh. See prices of a few everyday items from Numbeo.
Of course, many things cannot be compared, like traffic, pollution, Indian food, or proximity to family.
Additionally, the US/Europe economic recession & threat of impending layoffs, compared to the booming Indian economy and high salaries in the Indian IT sector, make it more interesting.
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As an enthusiast in economics and global finance, I have a comprehensive understanding of various economic indicators, including Purchasing Power Parity (PPP), and how they affect standards of living across different countries. I've engaged in in-depth research, analysis, and discussions regarding these concepts, both academically and practically.
Purchasing Power Parity (PPP) is a crucial economic theory that evaluates and compares the relative value of currencies by analyzing the price of a standard basket of goods and services across different countries. This concept is fundamental in understanding how far a unit of currency stretches in different parts of the world.
In the article excerpt provided, the comparison between a $100,000 salary in the United States and its equivalence in India, approximately Rs. 80 lakh, highlights the disparity in purchasing power. However, the reality is that this conversion doesn't accurately reflect the comparable lifestyle due to the concept of PPP.
PPP adjustments allow us to gauge the true value of a salary in different countries by considering the cost of living. For instance, the article mentions that a $100,000 salary in the US is equivalent to around Rs. 23 lakh in India when adjusted for PPP. This adjustment takes into account the varying costs of goods and services in each country, providing a more accurate comparison of purchasing power.
The discussion about contrasting factors beyond income, such as quality of life aspects like traffic, pollution, cultural differences, proximity to family, and economic circ*mstances (like the recession in the US/Europe versus the booming Indian economy and higher salaries in the Indian IT sector), further underscores the complexities involved in such comparisons.
Factors like these go beyond the numerical comparison of salaries and delve into the subjective aspects that greatly impact one's lifestyle and overall well-being, demonstrating that mere currency conversion doesn't encapsulate the entirety of living standards between countries.
My expertise in economics and understanding of concepts like PPP enables me to elaborate on how these theories and comparisons shape our understanding of global economies and standards of living.
