Disappointed with your salary that looks small compared to H1 visa holders or people working in foreign countries? Next time when you get salary, don’t compare with the person getting more in US doing the same job and get disappointed. Instead, multiply your salary by three times as it costs more to buy a basket of same goods in the US than in India.

With offshoring creating job opportunities in India, many people are getting into MNCs operating from foreign countries, particularly from US. Once they get into a company, they will be happy with their payouts for few months. But later, they start comparing their salaries with their counterparts in US and get disheartened. But what they forget is that the purchasing power of the money in India is three times more than that in US. Let us consider the cost of living in India and US to understand better.

Food: Food is cheap in India. Let us look at the prices of the basic groceries in India and US. A standard loaf of bread costs between Rs.16 to Rs.20 in India whereas the same costs more than Rs.50 in US. One dozen eggs cost around Rs.33 in India, whereas the same costs around Rs.60 in US. 250 grams of tea powder costs around Rs.70 in India, whereas the same costs around Rs.190 in US.

Maid: You can probably get a maid for Rs.1,000 per month to clean dishes, wash clothes and even clean the floor daily. For the same amount in US, you can hardly get a maid to work for 2 hours.

Transportation: Autos in India are very cheap and they will cost you nearly Rs.12 for first 1.5 km and then Rs.7 per km. Even if you book a private cab you will be charged Rs.30 as minimum for first two Kms and Rs.15 for every subsequent Km. Whereas in New York City minimum taxi fare is Rs.225.

Apartment rent: A 2 bedroom flat in a nice locality costs around Rs.7000 in India whereas the same costs around Rs.54,000 in US. However, both the flats will not be the same. Flat in US includes central AC, fridge, gas burners, and some furniture, etc. Flats are not available without these facilities in US.

utilities: In India, the government subsidizes gas prices. You can get a gas cylinder for Rs.315 in India but the same amount of gas in US costs around Rs.2250. For high quality cable pictures, you can install set top box, which would provide a reasonable amount of channels at a maximum of Rs.400 per month in India. But, 70 channels through cable TV in US cost around Rs.2250. The yearly subscription price for the newspaper, Wall Street Journal costs around Rs.5355 and its equivalent in India, The Economic Times costs around Rs.1260.

Other expenses: Haircut in US costs around Rs.350, but the same thing in India costs around Rs.50 only. Healthcare is very cheap in India. You can consult a private doctor for Rs.150 in India. Consulting fee of a doctor in US will be somewhere around Rs.6750.

Somebody in US may be making money, but they are surely not saving because the prices are very high and the value of services you get in US is very less. This is because of the ‘Purchasing Power Parity’.

Purchasing Power Parity
Purchasing Power Parity (PPP) is an economic theory that measures the amount of adjustment needed on the exchange rate between different countries in order for the exchange to be equivalent to purchasing power of each currency. Simply, PPP is the amount required to buy a certain basket of goods that can be bought in the given country with the money it generates.

Due to PPP, some of the basic and important needs of a person such as food, shelter, clothing, transportation and entertainment are cheap in India. The purchasing power of Indian rupee is more compared to the US dollar. This is also the reason so many people who have gone abroad are returning back to India to work even at lower pay.

The personal financial planning section at living-smartly.com provides unbiased information to guide you to make the right decisions with your personal finances. Here, you can get tips on various topics right from how to save money to where to invest your savings.