What is the real value of US Dollars in terms of Indian Rupee

Published on Tuesday, December 30, 2014
One of the most common question that arises among people who are planning to migrate to developed countries that how much can I purchase with salary of US $ 5000 or 10,000 a month.

To explain the value of Indian Rupee in terms of US $, I will use Big Mac Index by The Economist and Purchasing Power Parity by World Bank

PPP factor of India is 0.3 in terms of  $US 
Indian Rupee Valuation

Monetary value of  US$ 1 = INR 63.70 (30 December 2014)

In terms of PPP US$ 1 = 63.70  * 0.3 = INR 19.11

This the product you can purchase of US $ 1 in Newyork city can be purchase for Rs 19.11 in New Delhi.

So if you salary is US $ 5000 in Newyork, it is equivalent (in terms of PPP) of 5000*19.11 = Rs.95,550


Must read to understand the concept


  1. Forex - All you need to know
  2. Foreign currency accounts

Big Mac Index

The Economist, one of the leading economics magazine introduced Big Mac Index to compare purchasing power of various currencies around the world by comparing price of a standard Big Mac.

McDonald's is an international fast food chain and it has 35,000 restaurateurs 119 countries around the world.

Indian version of Big Mac is Maharaja Mac

Price of 1 Maharaja Mac in India = Rs 106 

Price of 1 Big Mac = $4.8 = 4.8 * 63.7 = Rs 305

In terms of Big Mac  US$ 4.8 = Rs 106

Value of  US$ 1 = 106 /4.8  =  Rs 22.08

So value of US$ is near about Rs 20 in terms of real purchasing power.

Many of the engineers and migrants from Punjab flaunts about their salaries in US and UK. Many of my friends are getting $3000 to $4000 a month. By converting US$ 4000 into INR 4000*60 (Approx) = Rs 2,40,000, this looks good money. But to know how much you can actually buy, simply divide it by 3, so it Rs80,000. 

So a person making $4000 in USA has an equal standard of living as a person earning Rs 80,000 in India. 

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Sources

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