Comments on: The High Cost of Living — 2 http://www.deeshaa.org/2006/03/22/the-high-cost-of-living-2-3/ Mon, 13 Feb 2012 05:41:09 +0000 http://wordpress.org/?v=2.9.2 hourly 1 By: Atanu Dey on India’s Development » The High Cost of Living http://www.deeshaa.org/2006/03/22/the-high-cost-of-living-2-3/comment-page-1/#comment-104898 Atanu Dey on India’s Development » The High Cost of Living Thu, 12 Jul 2007 08:16:05 +0000 http://www.deeshaa.org/2006/03/21/the-high-cost-of-living-2-3/#comment-104898 [...] bjective measure of the cost of living. I will present that the next time. [Continued in Part 2.] 17 Comments to 'The High Cost of Living'. Want [...] [...] bjective measure of the cost of living. I will present that the next time. [Continued in Part 2.]

17 Comments to ‘The High Cost of Living’. Want [...]

]]> By: Kishore Jain http://www.deeshaa.org/2006/03/22/the-high-cost-of-living-2-3/comment-page-1/#comment-17323 Kishore Jain Fri, 09 Jun 2006 20:11:04 +0000 http://www.deeshaa.org/2006/03/21/the-high-cost-of-living-2-3/#comment-17323 Dear Sir, I am working with a multinational company in USA who is into manufacturing of medical devices. I am getting a salary of $70,000.I live in New Hampshire. If I relocate to India with the same company what salary should I expect.Should I expect the same1:1 or more or less. Your reply will be appreciated, Kind Regards, Kishore Jain Dear Sir,
I am working with a multinational company in USA who is into manufacturing of medical devices.
I am getting a salary of $70,000.I live in New Hampshire.
If I relocate to India with the same company what salary should I expect.Should I expect the same1:1 or more or less.
Your reply will be appreciated,
Kind Regards,
Kishore Jain

]]> By: vishal http://www.deeshaa.org/2006/03/22/the-high-cost-of-living-2-3/comment-page-1/#comment-10889 vishal Tue, 11 Apr 2006 18:16:37 +0000 http://www.deeshaa.org/2006/03/21/the-high-cost-of-living-2-3/#comment-10889 With regards to Pizza Hut, Dominos and Mc D, you guys have totally missed the point. These foodstuffs are the staple diet in USA and are common mans meal. So there are millions of pizzas and burgers are sold daily, driving down prizes. In India they are considered "elite" ! Hardly a thousand odd pizzas are sold a day thereby increasing prizes ! You should compare a burger with a samosa. A commom mans fast food in both countries and then see ...a samosa costs just Rs 4-5 ... i.e approx 10 cents add another 10 cents for a chhota pepsi and you have a meal in 20 cents ... now compare that to a burger and soda !!! With regards to Pizza Hut, Dominos and Mc D, you guys have totally missed the point.

These foodstuffs are the staple diet in USA and are common mans meal. So there are millions of pizzas and burgers are sold daily, driving down prizes. In India they are considered “elite” ! Hardly a thousand odd pizzas are sold a day thereby increasing prizes !

You should compare a burger with a samosa. A commom mans fast food in both countries and then see …a samosa costs just Rs 4-5 … i.e approx 10 cents add another 10 cents for a chhota pepsi and you have a meal in 20 cents … now compare that to a burger and soda !!!

]]> By: Aditya http://www.deeshaa.org/2006/03/22/the-high-cost-of-living-2-3/comment-page-1/#comment-10768 Aditya Sat, 08 Apr 2006 20:18:58 +0000 http://www.deeshaa.org/2006/03/21/the-high-cost-of-living-2-3/#comment-10768 very interesting post atanu ... the numbers threw me off, i was sure there had to be a big difference after bean counting, and reading some of the comments has made me more likely to believe some of the statistics mentioned therein. looking forward to seeing your response to the comments very interesting post atanu … the numbers threw me off, i was sure there had to be a big difference after bean counting, and reading some of the comments has made me more likely to believe some of the statistics mentioned therein.

looking forward to seeing your response to the comments

]]> By: Manoj Guta http://www.deeshaa.org/2006/03/22/the-high-cost-of-living-2-3/comment-page-1/#comment-10738 Manoj Guta Sat, 08 Apr 2006 04:56:37 +0000 http://www.deeshaa.org/2006/03/21/the-high-cost-of-living-2-3/#comment-10738 This is in reponse to M's comment. First of all, the Pizza hut in india dishes out even 4 pan pizzas at 200 bucks, i.e. 4 pizzas for about US$6. Secondly, the quality of Pizza hut in US sucks and sucks big time. Next, the McD at US is considered a happy place for kallus only. The burgers there suck. Over here in India, it is so many times better. so, better to talk after experiencing yourself, rather than believing on hearsay. As for the author's argument, there are too many flaws. India's GDP is $3100 = Rs.139500 p.a. = Rs. 382 per day = Rs. 48 per hour. So, it means a haircut costs less than 30 minutes of work in india. By contrast, US per hour GDP works out to $14, while a hair cut here costs in between $20-30. So, that is worth about 1.5-2 hours of work in US, meaning 3-4 times costly compared to India. Similarly, the cost of housing in India is highly overstated. It will cost about Rs.5-6 lacs on an average for a one bed atmt in india (not talking about Delhi or Mumbai, because in such a case I should be comparing the Manhattan and LA aptmt rates, where one bed aptmt comes in the range of $500,000 and upwards). So, it will take 4-5 years for a aptmt in India, while in US it will take about 2 years. So, the housing in India is twice as costly. Moreover, the figures get accentuated against India, because of the huge urban-rural disparity. More than 60% population is still in rural areas, where the per capita GDP is only about 20% of the urban PC GDP. In case of US, the rural population is negligible and disparity less evident except in some states like Louisiana or in central parts. so, if we only look at urban purchasing power parity, Indians are no less poor cousins of their US counterparts. At $70,000 p.a. income in NY, one enjoys same standard of living as in Mumbai at Rs.700,000 p.a. That's been my experience at least! Write back at manojonline123@gmail.com for further discussions... This is in reponse to M’s comment. First of all, the Pizza hut in india dishes out even 4 pan pizzas at 200 bucks, i.e. 4 pizzas for about US$6. Secondly, the quality of Pizza hut in US sucks and sucks big time. Next, the McD at US is considered a happy place for kallus only. The burgers there suck. Over here in India, it is so many times better. so, better to talk after experiencing yourself, rather than believing on hearsay.

As for the author’s argument, there are too many flaws. India’s GDP is $3100 = Rs.139500 p.a. = Rs. 382 per day = Rs. 48 per hour. So, it means a haircut costs less than 30 minutes of work in india. By contrast, US per hour GDP works out to $14, while a hair cut here costs in between $20-30. So, that is worth about 1.5-2 hours of work in US, meaning 3-4 times costly compared to India. Similarly, the cost of housing in India is highly overstated. It will cost about Rs.5-6 lacs on an average for a one bed atmt in india (not talking about Delhi or Mumbai, because in such a case I should be comparing the Manhattan and LA aptmt rates, where one bed aptmt comes in the range of $500,000 and upwards). So, it will take 4-5 years for a aptmt in India, while in US it will take about 2 years. So, the housing in India is twice as costly. Moreover, the figures get accentuated against India, because of the huge urban-rural disparity. More than 60% population is still in rural areas, where the per capita GDP is only about 20% of the urban PC GDP. In case of US, the rural population is negligible and disparity less evident except in some states like Louisiana or in central parts. so, if we only look at urban purchasing power parity, Indians are no less poor cousins of their US counterparts. At $70,000 p.a. income in NY, one enjoys same standard of living as in Mumbai at Rs.700,000 p.a. That’s been my experience at least! Write back at manojonline123@gmail.com for further discussions…

]]> By: Rishikesh Shetty http://www.deeshaa.org/2006/03/22/the-high-cost-of-living-2-3/comment-page-1/#comment-9866 Rishikesh Shetty Sun, 02 Apr 2006 07:48:45 +0000 http://www.deeshaa.org/2006/03/21/the-high-cost-of-living-2-3/#comment-9866 I think what you should have done is compare the average per sq foot price in India with the per capita income. Otherwise the comparison is just not fair. In the article you do assume that the average price per sq foot would be 2000. I think its way off. It has to be lesser that that. Dont you think? I think what you should have done is compare the average per sq foot price in India with the per capita income. Otherwise the comparison is just not fair. In the article you do assume that the average price per sq foot would be 2000. I think its way off. It has to be lesser that that. Dont you think?

]]> By: Ashish http://www.deeshaa.org/2006/03/22/the-high-cost-of-living-2-3/comment-page-1/#comment-8543 Ashish Sat, 25 Mar 2006 20:38:03 +0000 http://www.deeshaa.org/2006/03/21/the-high-cost-of-living-2-3/#comment-8543 I agree with you method of analysis only if GDP is property measured. In India I doubt if that is the case. Take the example of haircut. Based on per capital GDP of India, haircut look expensive compared to USA. But I really doubt the GDP of India includes the informal service sectors such as hair cutting saloons. So, GDP is underreported and so is the per capital GDP. Most of the poor sections of the society actually trade n such an informal sector. If you take the population that trades in the formal sectors (which account for reported GDP) in India and then calculate the per capital GDP, then recalculate your figures, they will be different. Do you really think that even average India requires to work for 3 hours just to get his hair cut done? If that is the case, then person doing the hair cut must be very rich. He can command 3 hours worth of work of other labourer for what, an 1/2 worth of work! You see the problem in the calculations? Your calculations for gasoline makes more sense. Both US and India need to import gasoline and so this comparison is much more valid. But average person in India does not own an automobile. Also, you don't need to travel long distance in India just to get your groceries. The point here is that economy adjusts to the local circumstances and therefore any comparison across the countries is going to difficult to make. Also, remember that Indians can take advantage of cheaper imports by opening up their economy. But Americans can't take advantage of cheaper services (like haircuts) by opening up their immigration sector. Why? Loss of political power, risk of violence and riots and other factors make it more difficult. So, I would bet that a country that has higher population density and freerer economy would have much better standard of life (in terms of conveniences and not necessarily in terms of physical goods). I agree with you method of analysis only if GDP is property measured. In India I doubt if that is the case. Take the example of haircut. Based on per capital GDP of India, haircut look expensive compared to USA. But I really doubt the GDP of India includes the informal service sectors such as hair cutting saloons. So, GDP is underreported and so is the per capital GDP. Most of the poor sections of the society actually trade n such an informal sector.

If you take the population that trades in the formal sectors (which account for reported GDP) in India and then calculate the per capital GDP, then recalculate your figures, they will be different.

Do you really think that even average India requires to work for 3 hours just to get his hair cut done? If that is the case, then person doing the hair cut must be very rich. He can command 3 hours worth of work of other labourer for what, an 1/2 worth of work!

You see the problem in the calculations?

Your calculations for gasoline makes more sense. Both US and India need to import gasoline and so this comparison is much more valid. But average person in India does not own an automobile. Also, you don’t need to travel long distance in India just to get your groceries.

The point here is that economy adjusts to the local circumstances and therefore any comparison across the countries is going to difficult to make.

Also, remember that Indians can take advantage of cheaper imports by opening up their economy. But Americans can’t take advantage of cheaper services (like haircuts) by opening up their immigration sector. Why? Loss of political power, risk of violence and riots and other factors make it more difficult.

So, I would bet that a country that has higher population density and freerer economy would have much better standard of life (in terms of conveniences and not necessarily in terms of physical goods).

]]> By: Ramnath http://www.deeshaa.org/2006/03/22/the-high-cost-of-living-2-3/comment-page-1/#comment-7879 Ramnath Fri, 24 Mar 2006 15:09:46 +0000 http://www.deeshaa.org/2006/03/21/the-high-cost-of-living-2-3/#comment-7879 Parijat, we are talking about relative per capita GDP here. So, when you took India's per capita GDP ($735.6/1.08) from CIA Fact Book shouldnt you have taken the corresponding USA figure ($41,800) as well from there? And 'decent house for four' is subjective, what's it - 800sqft, 1000sqft, 1200sqft? Parijat, we are talking about relative per capita GDP here. So, when you took India’s per capita GDP ($735.6/1.08) from CIA Fact Book shouldnt you have taken the corresponding USA figure ($41,800) as well from there?

And ‘decent house for four’ is subjective, what’s it – 800sqft, 1000sqft, 1200sqft?

]]> By: Deep http://www.deeshaa.org/2006/03/22/the-high-cost-of-living-2-3/comment-page-1/#comment-7676 Deep Thu, 23 Mar 2006 16:51:22 +0000 http://www.deeshaa.org/2006/03/21/the-high-cost-of-living-2-3/#comment-7676 Atanu This is a nice approach. I have three points to add. Firstly, the value of time differs across geographies, so you have to build in an exchange rate that captures these relative valuations. Once you do that, you may find that the US is more expensive than India, especially in non-traded goods. Secondly, your measure has the feel of a proxy for productivity. I am not surprised that India is less productive than the US. Thirdly, there is some information in the data that you use that you have overlooked. What matters for comparison is not only the separate prices of tradeables and non-tradeables, but also, the relative price between these two things in any one location. You will find that the price of non-tradeables in terms of tradeables will be much higher in the US than it is in India. Economic theory tells us that this is what we should expect, because the country with a higher productivity in traded goods (the US) will have its non-traded goods sector competing for labor with traded goods; high productivity in the traded goods sector will raise wages there, but the competition for labor will ensure that the non-traded goods sector inflates as well. Atanu
This is a nice approach. I have three points to add.

Firstly, the value of time differs across geographies, so you have to build in an exchange rate that captures these relative valuations. Once you do that, you may find that the US is more expensive than India, especially in non-traded goods.

Secondly, your measure has the feel of a proxy for productivity. I am not surprised that India is less productive than the US.

Thirdly, there is some information in the data that you use that you have overlooked. What matters for comparison is not only the separate prices of tradeables and non-tradeables, but also, the relative price between these two things in any one location. You will find that the price of non-tradeables in terms of tradeables will be much higher in the US than it is in India. Economic theory tells us that this is what we should expect, because the country with a higher productivity in traded goods (the US) will have its non-traded goods sector competing for labor with traded goods; high productivity in the traded goods sector will raise wages there, but the competition for labor will ensure that the non-traded goods sector inflates as well.

]]> By: M http://www.deeshaa.org/2006/03/22/the-high-cost-of-living-2-3/comment-page-1/#comment-7661 M Thu, 23 Mar 2006 14:29:48 +0000 http://www.deeshaa.org/2006/03/21/the-high-cost-of-living-2-3/#comment-7661 Speaking of food, I too made the mistake of going to Pizza Hut a few times(once in 6 months). The difference in the quality of pizza here and that of in the US is astonishing. Dominos even more so. The stuff here is garbage. Too much refined flour. Microscopic toppings. And pathetic base. I order once in 6 months to remind myself why I don't eat the garbage that these places dish out. In 2002, the price of a medium pizza at Pizza Hut was about 400 Rs. That was then nearly the price of a medium pizza in the US!. Pizza Hut has reduced prices but it's still too much for too little. About 6 months back, ordered a foot sub from subway. Gawd, no pickles to speak of and too many green chillies. And worst of all, nearly 280 Rs. That is barely cheaper than US subway prices. As for McDonalds, haven't gone to any in India yet. But from what I hear, no comparison to the US at all. Speaking of food, I too made the mistake of going to Pizza Hut a few times(once in 6 months). The difference in the quality of pizza here and that of in the US is astonishing. Dominos even more so. The stuff here is garbage. Too much refined flour. Microscopic toppings. And pathetic base. I order once in 6 months to remind myself why I don’t eat the garbage that these places dish out. In 2002, the price of a medium pizza at Pizza Hut was about 400 Rs. That was then nearly the price of a medium pizza in the US!. Pizza Hut has reduced prices but it’s still too much for too little.
About 6 months back, ordered a foot sub from subway. Gawd, no pickles to speak of and too many green chillies. And worst of all, nearly 280 Rs. That is barely cheaper than US subway prices. As for McDonalds, haven’t gone to any in India yet. But from what I hear, no comparison to the US at all.

]]> By: Parvati http://www.deeshaa.org/2006/03/22/the-high-cost-of-living-2-3/comment-page-1/#comment-7654 Parvati Thu, 23 Mar 2006 05:20:10 +0000 http://www.deeshaa.org/2006/03/21/the-high-cost-of-living-2-3/#comment-7654 An "Aaaah" post! Basically, I think(maybe in a simplistic way), that if we earn more in one second then, automatically the cost of living decreases. An “Aaaah” post!
Basically, I think(maybe in a simplistic way), that if we earn more in one second then, automatically the cost of living decreases.

]]> By: Varada http://www.deeshaa.org/2006/03/22/the-high-cost-of-living-2-3/comment-page-1/#comment-7582 Varada Wed, 22 Mar 2006 20:14:50 +0000 http://www.deeshaa.org/2006/03/21/the-high-cost-of-living-2-3/#comment-7582 Leaving all the technical jargon aside, here is a news item (Paisa, yeh kaisa?) that supports Atanu's theory though in a somewhat different manner. http://web.mid-day.com/diary/diary.htm It says 25 paise coins are not being accepted by shopkeepers and the general public inspite of being legal tender because they are considered to be of no value. Contrast this with the USA where even 1 cent is gladly accepted and given, no questions asked. Leaving all the technical jargon aside, here is a news item (Paisa, yeh kaisa?) that supports Atanu’s theory though in a somewhat different manner. http://web.mid-day.com/diary/diary.htm
It says 25 paise coins are not being accepted by shopkeepers and the general public inspite of being legal tender because they are considered to be of no value. Contrast this with the USA where even 1 cent is gladly accepted and given, no questions asked.

]]> By: Parijat http://www.deeshaa.org/2006/03/22/the-high-cost-of-living-2-3/comment-page-1/#comment-7359 Parijat Wed, 22 Mar 2006 14:31:51 +0000 http://www.deeshaa.org/2006/03/21/the-high-cost-of-living-2-3/#comment-7359 Atanu, The numbers you have used seem off significantly (call me a bean counter but its important to be one to spot HUGE errors). India's GDP per capita is actually 736 dollars (CIA factbook). Also, a decent house for four can be had for about 8 lakhs (not 32 lakhs) - you should agree because clearly $70,000=approx 30 lakhs... so clearly you are not saying that houses in India cost more than in the US in absolute costs. That means that the cost of a house is around 25 years (not 200 years or even 100 years). This is a first cut response. I haven't found time to do all the bean-counting yet... will come back with more thoughts later. Atanu,
The numbers you have used seem off significantly (call me a bean counter but its important to be one to spot HUGE errors). India’s GDP per capita is actually 736 dollars (CIA factbook). Also, a decent house for four can be had for about 8 lakhs (not 32 lakhs) – you should agree because clearly $70,000=approx 30 lakhs… so clearly you are not saying that houses in India cost more than in the US in absolute costs. That means that the cost of a house is around 25 years (not 200 years or even 100 years).

This is a first cut response. I haven’t found time to do all the bean-counting yet… will come back with more thoughts later.

]]> By: Brough Turner http://www.deeshaa.org/2006/03/22/the-high-cost-of-living-2-3/comment-page-1/#comment-7358 Brough Turner Wed, 22 Mar 2006 13:50:26 +0000 http://www.deeshaa.org/2006/03/21/the-high-cost-of-living-2-3/#comment-7358 There's a US-only post using this same approach here: http://cafehayek.typepad.com/hayek/2006/01/working_for_sea.html Another interesting parameter is the rate that things are getting better. While there is no doubt people in the US have more "stuff", the rate of improvement, or at least people's expectations for the rate of improvement, may be more important for personal happiness. Growth rates in India have pulled ahead. ...just a thought... There’s a US-only post using this same approach here: http://cafehayek.typepad.com/hayek/2006/01/working_for_sea.html
Another interesting parameter is the rate that things are getting better. While there is no doubt people in the US have more “stuff”, the rate of improvement, or at least people’s expectations for the rate of improvement, may be more important for personal happiness. Growth rates in India have pulled ahead. …just a thought…

]]> By: Abhijat http://www.deeshaa.org/2006/03/22/the-high-cost-of-living-2-3/comment-page-1/#comment-7337 Abhijat Wed, 22 Mar 2006 05:55:54 +0000 http://www.deeshaa.org/2006/03/21/the-high-cost-of-living-2-3/#comment-7337 Dear Atanu, Great fun reading this post! I am not an economist, so I lack prerequisite information for critical analysis. But a question (excuse, if naive): To what extent is the GDP sensitive to processes that determine costs/prices ? The basic concern is that a measure like PGTEC should be immune to details of underlying processes. In other words I am unable to see the invariance of GDP very clearly. If I have to RTFM, I'll appreciate a few pointers, maybe offline, if you please. Regards, - Abhijat Dear Atanu,

Great fun reading this post! I am not an economist, so I lack prerequisite information for critical analysis. But a question (excuse, if naive): To what extent is the GDP sensitive to processes that determine costs/prices ? The basic concern is that a measure like PGTEC should be immune to details of underlying processes. In other words I am unable to see the invariance of GDP very clearly. If I have to RTFM, I’ll appreciate a few pointers, maybe offline, if you please.

Regards,

- Abhijat

]]> By: Little Ram http://www.deeshaa.org/2006/03/22/the-high-cost-of-living-2-3/comment-page-1/#comment-7336 Little Ram Wed, 22 Mar 2006 05:34:47 +0000 http://www.deeshaa.org/2006/03/21/the-high-cost-of-living-2-3/#comment-7336 I think this PGTEC measure is sound,Atanu. The only caveat being that GDP per se is a one meausure of economic output and can fail to capture non-monetised services like that of housewives, etc. Also, as an example, as opposed to the US I would imagine that sons working in small business owned by their fathers in India might not get paid a real wage. So does this distort our GDP measure? It will be good to hear from you about this too. I think this PGTEC measure is sound,Atanu. The only caveat being that GDP per se is a one meausure of economic output and can fail to capture non-monetised services like that of housewives, etc. Also, as an example, as opposed to the US I would imagine that sons working in small business owned by their fathers in India might not get paid a real wage. So does this distort our GDP measure? It will be good to hear from you about this too.

]]> By: Ramnath http://www.deeshaa.org/2006/03/22/the-high-cost-of-living-2-3/comment-page-1/#comment-7315 Ramnath Tue, 21 Mar 2006 19:22:13 +0000 http://www.deeshaa.org/2006/03/21/the-high-cost-of-living-2-3/#comment-7315 Great post, Atanu. I have a question. How is it different from expressing cost as a percentage of average income (per capita GDP)? Let's say, PPCI (percentage of per capita income) Of course, cost of some goods/services might reduce to 0.000001% But you can always use Per Capita Income Per Day in such cases. PGTEC is objective. But, what are the other benefits? Great post, Atanu.

I have a question.

How is it different from expressing cost as a percentage of average income (per capita GDP)?

Let’s say, PPCI (percentage of per capita income)

Of course, cost of some goods/services might reduce to 0.000001%

But you can always use Per Capita Income Per Day in such cases.

PGTEC is objective. But, what are the other benefits?

]]>