Essay
PPP Is Not a Fact About a Country
It is a fact about a basket. And urban Gen Z is not spending against the one the World Bank weighted.
All PPP calculators tell you that what you can buy for 3 dollars in the US needs just a dollar in India. This is exactly how salary converters worked. A $100k offer in the US used to be said to be equivalent to 30 LPA in India.
All of this breaks down for Indian urban Gen Z. A specialty coffee in a Bandra cafe costs the same as in the US. A trip to Japan costs the same for an American as it costs for an Indian Gen Z. So does a Claude subscription. All discretionary spending items — sneakers, MacBooks, electronics, branded clothes — cost the same, or in fact sometimes higher, in India versus the West.
As Gen Z is eating healthier than ever, the fact that Indian carb-heavy grocery items are 5x more expensive in the US hurts them less and less. In fact, whey protein costs the same in both.
The PPP conversions were made using weightages for staples, rents and other essential products and services. While this served the spending pattern of boomers, urban Gen Z spending patterns are vastly different.
My estimate is that the real PPP ratio for the top 10% of urban India is closer to 1.7:1 than 3:1. At 1.7:1, that $100k offer isn't 30 LPA. It's closer to 55. Nobody is pricing it that way yet.
So I built the calculator
Real Rate answers one question: what would you need to earn there to live the way you live here? It asks nine questions about how you actually spend — rent, international trips, how often you replace a phone — and those answers become the weights. You never see a ratio, a weight or a percentage. You see one salary become another, after tax on both sides.
Comparing two salaries gross quietly misleads, because the same nominal figure is taxed very differently in the two countries. So the flow runs gross → tax → take-home → price-adjust the take-home → gross back up on the other side.
The control test. The most important test in the build asserts that a National Average basket reproduces the published World Bank factor — index 0.283, a ratio of 3.54:1, turning $100k into ₹24.9L. Change nothing but the basket, to one belonging to a globally-exposed urban consumer, and the same engine returns 1.71:1, and ₹51.6L.
If every basket produced 1.7:1 this would be a polemic wearing a calculator's clothes. A frugal set of answers is separately asserted to stay above 2.4:1.
That is the entire argument, made falsifiable. The national number is not wrong. It is correct about a basket dominated by cereals, rent, fuel and domestic services — exactly the categories where India genuinely is three to ten times cheaper. It is simply being applied to people whose marginal rupee goes to imported hardware, dollar-priced software, international travel and specialty F&B, every one of which sits at or above parity. Applying a number built for one spending pattern to a completely different one lands roughly 2x off.
The part PPP equivalence hides
Two salaries that buy an identical daily life do not leave you equally wealthy. Savings are not spent on a local basket — they convert at the exchange rate, not at purchasing power. On the default assumptions, ₹40L in Bengaluru leaves ₹18.6L a year; the equivalent US salary leaves $54,491, which is about ₹48L. Roughly 2.6x as much, for the same life.
A note on status: the twelve category ratios behind the engine are seed values, sourced and calibrated against the World Bank control, but the hand-checked price panel has not been run yet. Every SKU is specified with its price left null, and a test refuses any price without an observation date — so a fabricated number cannot quietly enter the config. Treat the output as a sizing estimate, not a quote. Not financial or tax advice.
Open Real Rate → · First published as a post on LinkedIn.