When comparing salaries across borders, many are dazzled by the higher numbers abroad. But bigger isn’t always better. A salary of ₹75 lakh in New York may sound impressive, but it may not go as far as ₹25 lakh in Mumbai when adjusted for the cost of living. Let’s explore why, through the lens of Purchasing Power Parity (PPP).
Purchasing Power Parity is an economic theory that adjusts currencies to reflect the cost of living and inflation differences across countries.
For example:
If a burger costs ₹100 in India and $20 in the US, the PPP rate is ₹5 per $1 (100/20).
So, even though the actual exchange rate might be ₹85.65 to $1, the PPP-adjusted rate is far more insightful for understanding real purchasing power.
According to the International Monetary Fund (IMF), India is the third-largest economy in the world when ranked by PPP — not GDP — which shows how far a rupee can go within India compared to dollars elsewhere.
| Expense | Mumbai (USD) | New York (USD) |
| Monthly costs (without rent) | 386.32 | 1565.56 |
| 1BHK apartment (city centre) | 596.03 | 4028.83 |
| Internet (60 Mbps) | 8.65 | 72.1 |
| Meal at restaurant | 3.93 | 25.17 |
| Gasoline (per gallon) | 4.88 | 4.16 |
| Avg salary (after tax) | 790.83 | 6617.92 |
Let’s calculate based on the current exchange rate: ₹85.65 per $1:
But when adjusted for Purchasing Power Parity, $29,202 in Mumbai provides the same standard of living as $108,047 in New York.
So in reality, you’d need around ₹92.5 lakh in New York to match what ₹25 lakh provides you in Mumbai!
People often chase big-dollar salaries without considering the real-world value of their income. By looking at PPP, you see a clearer picture.
₹25 lakh in India is equivalent in lifestyle terms to nearly ₹92.5 lakh in New York. So, unless you’re being paid more than that abroad, you’re likely better off financially in Mumbai.
A global salary is impressive, but what really matters is how much of it you keep — and how far it stretches. Thanks to a lower cost of living and favourable PPP, living in India, even with a lower nominal income, can provide a richer lifestyle and greater savings potential.
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.
Investments in the securities market are subject to market risks, read all the related documents carefully before investing.
Published on: Apr 6, 2025, 8:14 AM IST
Team Angel One
We're Live on WhatsApp! Join our channel for market insights & updates
Get the link to download the App
