Convert your salary from one currency to another using PPP Salary Calculator.
This PPP salary calculator uses information provided by The World Bank to make its calculations. The World Bank is an international organization that collects and analyzes data on countries around the world, including economic indicators like GDP, inflation, and exchange rates. This data is used to create the PPP exchange rates that are used by the PPP calculator to convert currencies.
PPP Salary Calculator
Contents
What is Purchasing Power Parity (PPP)?
Purchasing power parity (PPP) is a way to compare economic productivity and living standards across nations. It uses a “basket of goods” approach to compare countries’ currencies. Economists use PPP to compare standards of living between countries and some countries adjust their GDP figures based on PPP.
Let me explain this concept with an example. Suppose you have a salary of 50,000 INR in India, and you want to know how much it would be worth in the United States. The foreign exchange rate tells you that your salary is equivalent to roughly $600 US dollars (on 23.03.2023). But here’s the catch: the cost of living differs in each country, so you can’t compare the two currencies directly.
or can you purchase the same amount of services and goods in the United States for $600 that you are getting in India for ₹50000?
The simple answer is NO!
But why?
That’s where Purchasing Power Parity (PPP) comes into the picture. It’s a way to compare the purchasing power of different currencies by taking into account the cost of living in each country. Instead of just converting your salary using the exchange rate, you can use PPP to get a more accurate idea of what your standard of living would be like in the US.
This information can be useful if you’re planning on moving to a new country, working remotely, or sending money abroad. It helps you understand how much money you’ll need to maintain the same quality of life in a different country.
Purchasing power parity (PPP) exchange rate definition— “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.”
How to Convert Salary by PPP Calculator?
PPP salary calculator helps you effortlessly calculate purchasing power parity. You need to select the source country from the dropdown and enter the salary in the local currency of the source country. Then select the target country from the dropdown.
Now click on the Convert button to get the estimated salary in the target country to live the same life you are living with your salary in the source country.
Using the PPP Salary calculator for Converting Salary in India to the United States
Below is an example of calculating the purchasing power of India and the United States.
Suppose you want to calculate the required salary in the United States local currency (USD) to live a similar quality of life as you live in India with INR 50000 Salary.
Select Source Country: India
Enter Salary Amount: 50000
Select Target Country: United States
Now click on the convert button and you will get the output:
You require a salary of 2153.75 in the United States’s local currency to live a similar quality of life as you would with a salary of 50000.00 in India’s local currency.
So,
According to PPP, a salary of INR 50000 in India is equivalent to USD 2153.75 in the United States or 1,76,807.58 Indian Rupee. That is 3.54 times the amount you make in India. That means you need a 3.54x salary in the United States to live the same life you live in India with the same salary.
Calculating Purchasing Power Parity
PPP is calculated by comparing the prices of a basket of goods and services in different countries. This basket includes basic items like food, clothing, and housing. The price of the basket in each country is then converted to a common currency, typically the US dollar, using the exchange rate.
The PPP exchange rate is then calculated by dividing the price of the basket in one country by the price of the basket in another country. This gives an estimate of the relative value of the two currencies and helps to account for differences in the cost of living and inflation rates between countries.
How is PPP calculated?
Purchasing Power Parity (PPP) is calculated by the below formula:
PPP = (Cost of Good X in Currency1) / (Cost of Good X in Currency2)
This allows an individual to make comparisons of currencies and the value of a basket of goods they can buy.
Conclusion
The PPP salary calculator is an essential tool that simplifies converting your salary from one currency to another using the PPP exchange rate. Instead of having to calculate the conversion yourself using a complex formula, you can input your salary amount and select the relevant currencies. The calculator will then provide you with an accurate estimate of the equivalent purchasing power in the other country, taking into account the cost of living and inflation rates.
This means you don’t have to worry about the nuances of exchange rates and can be confident in the accuracy of your calculation. Whether you’re a remote worker, planning to move abroad, or sending money to a loved one in another country, the PPP salary calculator is a quick and easy way to ensure you have a good understanding of the purchasing power of your salary.
Frequently Asked Questions
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What is the PPP of India?
According to PPP, a salary of INR 50000 in India is equivalent to USD 2153.75 in the United States or 1,76,807.58 Indian Rupee. That is 3.54 times the amount you make in India. That means you need a 3.54x salary in the United States to live the same life you live in India with the same salary.
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How is PPP calculated?
PPP is calculated by comparing the price of a similar basket of goods and services in two countries and adjusting for exchange rates. The PPP exchange rate is the exchange rate that would make the cost of the basket of goods equal in both countries.
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How is PPP different from exchange rates?
Exchange rates are determined by the supply and demand for a currency in the foreign exchange market. They do not consider the differences in the cost of living and inflation rates between countries. PPP adjusts for these differences, making it a more accurate measure of the relative value of currencies.
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Is the PPP of India high?
As per the Reserve Bank of India (RBI), India currently holds the position of the world’s third-largest economy in terms of Purchasing Power Parity (PPP) with a contribution of 7 percent to the global Gross Domestic Product (GDP). China holds the first position with a share of 18 percent, followed by the United States with 16 percent.
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