#How many rupees for a big mac mac#

In other words, the number of rupees required to purchase one dollar should be 30% lower than what it is today, or about 42 rupees to the dollar.

#How many rupees for a big mac mac#

Theaters and auditoriums in Kerala have remained shut for over one and half years since the outbreak of COVID-19.For example, going by the latest edition of the Big Mac Index published in January, the rupee is undervalued by about 30% against the dollar. As we noted recently, it will have a rough ride, never mind what the Big Mac says.Ĭinemas to reopen in Kerala from October 25 for fully vaccinated people 50% occupancy allowed The rupee's real value is what the market is willing to pay for it at any point of time. While fundamentals like inflation and trade deficits matter - capital flows can make all the difference. The bottomline is this: there is no real value that one can safely assign to any currency. The Big Mac Index would suggest that the rupee need to appreciate another 20-25 percent to reach its ideal value. This means the rupee has appreciated by this small percentage in REER terms in the last seven years in real terms. Given how the rupee has moved against the US dollar and other currencies, and also given our higher rate of inflation, the Reserve Bank says that the rupee's REER is now just 3.13 percent more (as of December 2011) than what it was in 2004-05.

However, this does not tally well with the Reserve Bank's real effective exchange rate (REER) for the rupee - a measure of how exchange rates have moved against a basket of currencies weighted by trade and adjusted for relative inflation. This means the gross undervaluation must be in the region of 20-25 percent. Since July, the rupee has actually depreciated by another 15-20 percent in nominal terms. Today, after the rupee depreciation, it is $1.62. On 30 July, the Big Mac (which is chicken based in India against beef elsewhere) cost Rs 84 ($1.89 in terms of the dollar values then). Thus, against an undervaluation of 53 percent in July this year, the adjusted index for India showed a rupee undervaluation of only 8 percent. Once deflated by lower average country incomes, the Big Mac Index shows more realistic currency values. In the 30 July edition, therefore, The Economist adjusted raw Big Mac prices with the country's per capita income, and came up with completely different interpretations. When labour costs in China and India are so much below American costs, prices will reflect this reality. India's black money wizards should avoid eating too many Big Macs in Switzerland when they are depositing their ill-gotten wealth in that country.īut the Big Mac Index has come under serious criticism from economists who say that the raw PPP index needs to be at least adjusted for relative costs. The Swiss franc is the most overvalued currency, since the Big Mac costs $6.81 in Switzerland.

So, by definition, US trade warriors feel vindicated in their belief that China is using a weak yuan policy to export to the US. Similarly, the Chinese Big Mac is worth $2.44, which is 42 percent lower than the US price. Ergo: the rupee is undervalued to the same extent. In the latest computation of the Big Mac Index published by The Economist, the Big Mac costs $4.2 in the US and $1.62 in India - making the latter 61.5 percent cheaper than the US. Thus, if an item costs $10 in the US, and $5 in China and $1 in India, the Chinese currency is undervalued by 50 percent and the Indian one by 90 percent. The Economist carries this PPP analogy and uses the price of the Big Mac in various countries to check if currencies are undervalued or overvalued. In the Big Mac Index, a spurious index based on the price of a McDonald's Big Mac in various countries,the rupee is 61 percent undervalued.