BigMac Index and PPP

Economist.com – Big Mac Index: Useful for getting an idea of the Purchasing Power Parity.

An article recently in the Economic Times mentioned India’s PPP factor vs the dollar as 5.24 (or thereabouts), implying a realistic exchange rate Of Rs 9.50 or so to the dollar.

This is useful when we apply it back to tech pricing. It means that a computer costing USD 700 or so in the US should effectively cost 700 * 9.50 = Rs 6,650 in India as against 700 * 50 = Rs 35,000. So, if we can bring down the price of a computer to the PPP equivalent in a country, one will definitely see sales shoot up, creating the IT infrastructure the country needs.

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