Purchasing Power Parity Explained: Next time when your cousin, who has settled in the US, says he makes Rs 80 Lac a year, tell him you only need Rs 23 Lac to match his lifestyle in India. This is how Purchasing Power Parity (PPP) works.
According to Wikipedia, “Purchasing power parity is the measurement of prices in different countries that uses the prices of specific goods to compare the absolute purchasing power of the countries’ currencies, and, to some extent, their people’s living standards.”
PPP is an interesting economic concept, which in simpler words is the rate at which the currency of one country would have to be converted into that of another country to buy the same amount of goods and services in each country.
Purchasing Power Parity is an important factor that most people ignore while taking a job or shifting abroad. This may be a useful metric when you can compare job offers where you have a Rs 30 Lac offer to stay in India or settle in the US with an Rs 80 Lac offer.
Similarly, earnings of Rs 23 lacs in India will match an earning of Rs 65 lacs in the United Kingdom and Rs 37 Lacs in the UAE according to the Purchasing power.
Obviously, this simple PPP conversion is not enough as developed countries also offer public infrastructure, technology, services, opportunities, and social security as a whole. However, you can still take it into consideration, among other factors.
In addition, here are a few other important points to also consider while comparing the purchasing concepts in India vs US or abroad:
- In India, you can afford a maid, cook, driver, and many more facilities for a month for the price of a round of drinks in the US.
- Lifestyle may be good in foreign countries but they do have other issues. For example, gun violence, racism, etc in the United States.
- It’s not easy to become a citizen aboard. You might die of old age in the US as an Indian Citizen before your Green Card gets approved.
- Buying assets like Houses, Expensive cars, iPhones, Macbooks, Expensive Clothes from Zara, etc may be a totally different comparison while looking into the purchasing power.
- If you’re going abroad for earning and planning to save to return back, you can come with a huge lump-sum amount. However, if you’re planning to stay abroad, the Purchasing power parity concept will again come into effect. The same rate of savings on your earnings in India will be able to give you a similar lifestyle.
- Other countries may have similar or higher tax slab rates. While living aboard, you’ll be paying taxes to a foreign nation.
What do you say? What would you choose if given an option? Rs 80 Lacs in the United States or Rs 23 lacs in India? Do comment below your answer.
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Lol, its not easy to make 23 lacs in India, people hardly make 12 lacs. There is more crime in India than in US because law is a lot more stricter here. I would feel a lot safer living here than there, where you are judged only in Hindu/Muslim. #USAlifeisbetter
Non sense. What you say is all in NYT or WSJ. India is the best place to work and live, especially if you are second generation kid, which most are. I come to US once a year and each time I discover that India is much better.
I lived in Germany and returned after fifteen years, with a combination of both as a student and part time workjng professional. Life in India is clearly one without hassles of beibg stared at in the train and more the proficiency in the German language, one realises its not a cake walk in the park as it throws open more hidden facts and facets of leading life as a foreigner. Irrespective what you earn overseas, your peace of mjnd is back home
Obviously, you are a man .Ask any girl
What was your experience in that country? I’m seriously debating going there for masters which will fetch me a 50L job or staying back for 13-14 Lpa in India
Then why people who have lost thier jobs are scrambling to stay in in the US?
I don’t know where you are living in this planet; forget about experienced professionals but a fresh engineering graduates from tier-2 engineering colleges are getting packages more that 23 lacs pa. If you answer is to exclude engineers, doctors, lawyers and management graduates than a common street vender is earning 10 lacs plus in metros.
Aise sochane wala India me na hi rhe to behtar hai
Lol broo….
You are saying 23 lpa is tough to get but accordingly 80 lpa job in USA is also very tough bro..
People who will be able to get 80 lpa job in USA will also be able to get a job of 23 lpa in india…
So your logic is just a piece os bulls*it.
And, if you are talking about safety then its just your mentality how you think about your nation bcz the reason you are giving is also a piece of sh*t.
OMG, don’t be so angry. Everyone is giving an opinion. In US clean environment, not blatant racism as in other countries, application of laws, not much red tap. A person can’t be prosecuted based on race, religion,language and ethnicity Makes US attractive. On other hand family, social support, food language, friends and familiar environment in native country is very attractive. In my opinion Western passport also gives you freedom of movement.
Oh really? I believe it was US where George Floyd got killed!
And you say india is worse in racism than US??
First thing making money is depended on many factors like skill you possess experience,qualification and many more so making 23lpa is not hard nor easy same goes with 80lpa in usa….
Second about crime so i will suggest you just google crime in india vs usa you will be amaze india is better….. third you said you will feel safe their i think you also need gun to feel safe like rest of the people in usa…and fourth point you said about hindu-muslim is something you said right this is big problem of India all ther point you said are just your perspective not fact… no country is perfect you have to make most of it whether it India or usa…
Definitely staying in India. Apart from materialistic comparision family and cultural roots also to be considered. Now a days medical treatment in India has certain advantages.
India is the best
Great article!
Having been to India several times, I can confidently say that the comparison using PPP as a viable metric in determining quality of life is 100% wrong. There is a reason your cup of coffee costs 4$ at Starbucks in USA and you can’t afford a maid, chef and butler on a regular salary. That’s because all of these professions have to pay a living wage, and people do not rely on a slave class of millions dying in heat so a few people can live with a better purchasing power. That huge slave class is just that, and causes massive political instability and is potentially very dangerous. Also, India is terribly polluted, healthcare is horrendous, and it is way too densely populated, with very poor infrastructure on top. And from what I understand, very high youth unemployment now which is a recipe for disaster. It may be growing because western companies are relocating there from China at the moment, but it needs to get religion out of politics, regulate pollution, fix its railways, and build much better infrastructure to accommodate its massive population. We will see if it can manage such a massive transition to a developed country. The jury is still out I think.