<p>It works like any other exchange rate:</p>

<ul>
<li><p>Divide ₹50,000 by 70 to get about US$714 / month at market exchange rates</p></li>
<li><p>Divide ₹50,000 by 18 to get about PPP$2778 / month at PPP rates (so not a poor farmer)</p></li>
<li><p>Multiply USD$30 by 70 to get ₹2100 at market exchange rates</p></li>
<li><p>Multiply PPP$30 by 18 to get ₹540 at PPP rates</p></li>
</ul>

CC BY-SA 4.0
2019-10-24T20:42:39.297Z
You are right: ₹50,000 is more than the average Indian farmer earns, this is more like ₹10,000 or ₹20,000 (with sideline jobs).
Hans-Peter Stricker
CC BY-SA 4.0
2019-10-24T20:47:52.910Z
Nevertheless, this doesn't work: According to Gapminder's Dollar Street, PPP$30 is a somehow not atypical income of poor farmers, but ₹540 per month is an unrealistically low  income: not even the poorest farmers earn only such a small amount per month.
Hans-Peter Stricker
CC BY-SA 4.0
2019-10-24T23:16:27.887Z
@Hans-PeterStricker Let's take [the first example I came across from Gapminder](https://www.gapminder.org/dollar-street/family?place=557036781e788ebf3eb00f99) of a fruit collector and family in West Bengal with a monthly income of PPP$29 per adult so presumably about ₹520. Now take [the second case I found](https://www.gapminder.org/dollar-street/family?place=54b51a173755cbfb542c2473) of a farmer and family near Chennai with a monthly income of PPP$245 per adult so say about ₹4400 a month. Looking around their homes suggests different farmers can have very different incomes.
Henry
CC BY-SA 4.0
2019-10-24T20:35:19.527Z
2019-10-24T20:35:19.527Z
Henry
<p>Is there one single formula which allows to calculate the income of a person in <a href="https://economics.stackexchange.com/questions/27144/how-to-read-ppp-aloud?rq=1">PPP\$</a> from her income in LCUs (local currency units), given for example the  <a href="https://data.worldbank.org/indicator/PA.NUS.PPP" rel="nofollow noreferrer">PPP conversion factor, GDP (LCU per international $)</a> as published by the World Bank. </p>

<p>Assume for example an Indian farmer with a monthly income of ₹50,000, given India's PPP conversion factor of 18 and exchange rate ₹70 = $1. What is his monthly income in PPP\$ and by which formula? Is other or further information needed? </p>

<p>Vice versa: What is the farmer's monthly income in rupees when his income is known to be PPP\$30?</p>

<hr>

<p><strong>References:</strong></p>

<ul>
<li><p>GapMinder's <a href="https://www.gapminder.org/dollar-street/matrix?countries=India" rel="nofollow noreferrer">Dollar Street</a></p></li>
<li><p><a href="https://drive.google.com/drive/folders/0B9jWD65HiLUnRm5ZNWlMSU5GNEU" rel="nofollow noreferrer">Detailed income calculations for Dollar Street</a></p></li>
<li><p><a href="https://economics.mit.edu/files/805" rel="nofollow noreferrer">The Economic Lives of the Poor</a> by Abhijit V. Banerjee and Esther Duflo</p></li>
</ul>

<exchange-rates><poverty><purchasing-power-partity>
How to calculate PPP$ from LCUs?
Hans-Peter Stricker
# How to calculate PPP$ from LCUs?

(Asked by: username_0 on 2019-10-24)

Is there one single formula which allows to calculate the income of a person in [PPP\$](https://economics.stackexchange.com/questions/27144/how-to-read-ppp-aloud?rq=1) from her income in LCUs (local currency units), given for example the [PPP conversion factor, GDP (LCU per international $)](https://data.worldbank.org/indicator/PA.NUS.PPP) as published by the World Bank.

Assume for example an Indian farmer with a monthly income of ₹50,000, given India's PPP conversion factor of 18 and exchange rate ₹70 = $1. What is his monthly income in PPP\$ and by which formula? Is other or further information needed?

Vice versa: What is the farmer's monthly income in rupees when his income is known to be PPP\$30?

---

**References:**

* GapMinder's [Dollar Street](https://www.gapminder.org/dollar-street/matrix?countries=India)
* [Detailed income calculations for Dollar Street](https://drive.google.com/drive/folders/0B9jWD65HiLUnRm5ZNWlMSU5GNEU)
* [The Economic Lives of the Poor](https://economics.mit.edu/files/805) by Abhijit V. Banerjee and Esther Duflo

**Tags:** exchange-rates, poverty, purchasing-power-partity


---

## 1 answers

### Answer by username_1 on 2019-10-24. Score: 1

It works like any other exchange rate:

* Divide ₹50,000 by 70 to get about US$714 / month at market exchange rates
* Divide ₹50,000 by 18 to get about PPP$2778 / month at PPP rates (so not a poor farmer)
* Multiply USD$30 by 70 to get ₹2100 at market exchange rates
* Multiply PPP$30 by 18 to get ₹540 at PPP rates

> **Comments:**
> **username_0**: You are right: ₹50,000 is more than the average Indian farmer earns, this is more like ₹10,000 or ₹20,000 (with sideline jobs).  
> **username_0**: Nevertheless, this doesn't work: According to Gapminder's Dollar Street, PPP$30 is a somehow not atypical income of poor farmers, but ₹540 per month is an unrealistically low  income: not even the poorest farmers earn only such a small amount per month.  
> **username_1**: @Hans-PeterStricker Let's take [the first example I came across from Gapminder](https://www.gapminder.org/dollar-street/family?place=557036781e788ebf3eb00f99) of a fruit collector and family in West Bengal with a monthly income of PPP$29 per adult so presumably about ₹520. Now take [the second case I found](https://www.gapminder.org/dollar-street/family?place=54b51a173755cbfb542c2473) of a farmer and family near Chennai with a monthly income of PPP$245 per adult so say about ₹4400 a month. Looking around their homes suggests different farmers can have very different incomes.  

---

