Is there one single formula which allows to calculate the income of a person in PPP\$ from her income in LCUs (local currency units), given for example the PPP conversion factor, GDP (LCU per international $) 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?



1 Answer 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

  • $\begingroup$ 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). $\endgroup$ Oct 24, 2019 at 20:42
  • $\begingroup$ 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. $\endgroup$ Oct 24, 2019 at 20:47
  • $\begingroup$ @Hans-PeterStricker Let's take the first example I came across from Gapminder 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 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. $\endgroup$
    – Henry
    Oct 24, 2019 at 23:16

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